An environmental testing company needs to purchase equipment 2 years from now and expects to pay $50,000 at that time. At a real interest rate of 10% per year and inflation rate of 4% per year, what is the present worth of the cost of the equipment?

An environmental testing company needs to purchase equipment 2 years from now and expects to pay $50,000 at that time. At a real interest rate of 10% per year and inflation rate of 4% per year, what is the present worth of the cost of the equipment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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1. An environmental testing company needs to purchase equipment 2 years from now
and expects to pay $50,000 at that time. At a real interest rate of 10% per year and
inflation rate of 4% per year, what is the present worth of the cost of the equipment?

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