
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:Annual expenses for two alternatives have been estimated on different bases as follows.
End of Year Annual Expenses Estimated in
Future $
1
2
3
4
Alt. A
O Between $300,000-387,000
O Between $387,000-388,000
O Between $388,000-390,000
O Higher than $390,000
120,000
132,000
148,000
168,000
Alt. B
Annual Expenses Estimated in Real $ with
base=0
100,000
110,000
120,000
130,000
If the average general price inflation rate is expected to be 6% per year and the real rate of interest is 9% per year, what is the PW of Alt. A.? (use positive sign for expenses)
Hint: Purchasing power remains the same in year 1 with respect to b=0.
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