Basics Of Engineering Economy
2nd Edition
ISBN: 9780073376356
Author: Leland Blank, Anthony Tarquin
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Well-managed companies set aside money to pay for emergencies that inevitably arise in the course of doing business. If a commercial solid waste recycling and disposal company puts 0.5% of its after-tax income into such an account, how much will the company have after 7 years, provided the company’s after-tax income averages $15.2 million per year? The inflation and market rates are 5% per year and 9% per year, respectively.
You would like to buy a house that is currently on the market at $85,000, but you cannot afford it right now. However, you think that you would be able to buy it after 4 years. If the expected inflation rate as applied to the pricepri this house is 6% per year, what is its expected price after four years?
A company is planning to invest $500,000 in a new business opportunity. The current inflation rate in the country
is 1.3 % per quarter. If the company has the policy of maintaining the purchasing power of their invested dollars
and also earn 10% real interest rate per year,
(a) to what Future Dollars value the invested $500,000 should grow in 5 years?
(b) Calculate the purchasing power of the amount you found in part a) in terms of Today's Dollars.
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