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The cost of grocery will increase $12% per year starting 3 from now and will continue until year 10. The cost of years grocery in years 1 and 2 is $1500 per year. Determine the present worth of the cost through year 10 at a rate of 12% per year? $11653.25 2 $11463.56 3 $12802.56 4 $12101.98

The cost of grocery will increase $12% per year starting 3 from now and will continue until year 10. The cost of years grocery in years 1 and 2 is $1500 per year. Determine the present worth of the cost through year 10 at a rate of 12% per year? $11653.25 2 $11463.56 3 $12802.56 4 $12101.98

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The cost of grocery will increase $12% per year starting 3 years from now and will continue until year 10. The cost of grocery in years 1 and 2 is $1500 per year. Determine the present worth of the cost through year 10 at a rate of 12% per year? $11653.25 $11463.56 $12802.56 4 $12101.98
Transcribed Image Text:The cost of grocery will increase $12% per year starting 3 years from now and will continue until year 10. The cost of grocery in years 1 and 2 is $1500 per year. Determine the present worth of the cost through year 10 at a rate of 12% per year? $11653.25 $11463.56 $12802.56 4 $12101.98
Expert Solution
Step 1

Present worth is calculated by discounting the future cash flows using the discount rate.

Present worth = Future cash flow( 1+ rate )time

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