You just signed a business consulting contract with one of your clients. The client will pay you $50,000, in today's dollars, at the end of the first year increasing by $5,000 per year for five years. You anticipate the general inflation rate over this period to be 6%. Your desired inflation-free interest rate is 4%. Determine the equivalent present worth of this cash flow using constant dollar analysis and actual dollar analysis?

You just signed a business consulting contract with one of your clients. The client will pay you $50,000, in today's dollars, at the end of the first year increasing by $5,000 per year for five years. You anticipate the general inflation rate over this period to be 6%. Your desired inflation-free interest rate is 4%. Determine the equivalent present worth of this cash flow using constant dollar analysis and actual dollar analysis?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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