ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- QUESTION-2 Someone calculated the-future worth of his investment in term of today's dollars. The obtained result was $/945.89s, The life of the investment is expected to be 20 years. The average annual inflation rate along this period is 7%. If it is known that the investor earns 149% per year from this investment, what is the first cost of the investment?arrow_forwardRequired Information Assume the market Interest rate is 8% per year and Inflation averages 5% per year. d If the amounts had been quoted in CV dollars, what is the annual worth in future dollars? The annual worth in future dollars is $ 11,016 Explanation For CV dollars, first find the PW using the real rate i then, find AW using if i= 0.08-0.05 1+-0.05 PW = = 0.028571 = 2.8571% = $65,000+ PW = $240,000 $5000 0.028571 AW = $240,000 (0.08) AW = $19,200arrow_forward8 years ago a machine cost $774000. Now, the same machine costs $1546000. The average rate of inflation per year is close to: 6.77% 13.55% 4.52% None of the given answers 9.03%arrow_forward
- You would like to buy carcar t is currently on themarket at $85,000, but you cannot afford it right now. However, you think that youwould be able to buy it after 4 years. If the expected inflation rate as applied to the priceof this car is 6% per year, what is its expected price after 4 years?arrow_forwardAn initial $2000 investment is made that returns profits of $1000 and 1500 in the first and second years, respectively. The inflation rate is 5% and the market interest rate is 8%. Find the PW of the CFs assuming that they are expressed in terms of constant dollars.arrow_forward5arrow_forward
- Your department is budgeting miscellaneous expenses for the next 5 years. Your best guess at the annual inflationrate is 3.9 percent, and the combined MARR is 15 percent. Expenses currently run $14,500 per year. Assume thatexpenses are end-of-year payments.a. Determine the then-current dollar amounts for years 1, 2, 3, 4, and 5.b. Determine the constant dollar amount for years 1, 2, 3, 4, and 5.Year 2005 2006 2007 2008 2009Rate % 18.853% 15.995% 10.665% "16.220% "12.723%574 CHAPTER 12 / INFLATION EFFECTSc. Determine the PW of the then-current dollar amounts.d. Determine the PW of the constant dollar amounts.arrow_forwardMetroKlean LLC, a hazardous waste soil cleaning company, borrowed $2.5 million for 5 years to finance start-up costs for a new project involving site reclamation. The company expects to earn a real rate of return of 20% per year. The average inflation rate is 5% per year. a. Determine the capital recovery required each year with inflation considered. b. Determine the capital recovery if the company is satisfied with accumulating $2.5 million at the end of the 5 years with inflation considered. c. Determine the capital recovery in part ( b ) without considering inflation.arrow_forwardA machine that has been used for one year has a salvage value of $16,000 now which will drop by $1,000 per year. The maintenance costs for the next two years are $4,000 and $4,000. All the above values are expressed in real terms. It is also known that market interest rate over next 2 years will be 8% while expected inflation is 2% per year. Define the equivalent annual cost of the machine over 2 years in today's dollars. (Present your answer in dollars without $ sign and with 2 decimal places)arrow_forward
- A company is considering buying a cnc machine. in todays dollars the maintenance cost for the machine( paid at the end of each year) will be 25,000 26,000 27,000 29,000 32,000 for years 1 to 5. The general inflation rate is estimated to be 7% per year, and the company will receive 14% return (interest) per year on its invested funds during the inflationary period. The company wants to pay for maintenance expenses in equivalent equal payments( in actual dollars) at the end of the 5 years. Find the amount of the companys payments. The amount of the companys payment us $ thousand (round to the nearest thousand)arrow_forwardCompare the alternatives below on the basis of their capitalized costs with adjustments made for inflation. Use i=9% per year and f= 2.6% per year. Alternative X Y -17,500,000 -25,000 105,000 -12,000,000 -10,000 82,000 10 First cost, $ AOC, $ per year Salvage value, $ Life, years 00 The capitalized cost for alternative X is $-17711255.7039 O The capitalized cost for alternative Y is $ Select alternativearrow_forwardIf the inflation rate is 4.8% per year and themarket interest rate is known to be 10.2% per year,what is the implied real interest (inflation-free) ratein this inflationary economy?arrow_forward
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