Better Corporation can purchase a piece of equipment now for $120,000 or buy it 4 years from now for $188,000. The MARR requirement for the plant is a real return of 14% per year. If an inflation rate of 6% per year must be accounted for, what is the Future Value with inflation? a) $188,000 b) $255,873 c) $ 88,169 d) $120,000 Should the company buy the machine now or later? a) Now
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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.Five years ago, an industrial engineer deposited $10,000 into an account and left it undisturbed through now. The account is now worth $25,000. If the inflation over that period was 4% per year, what was the real ROR? What is the purchasing power of the $25,000 with respect to the purchasing power of dollars 5 years ago? The purchasing power of the $25,000 is $Aquatech Microsystems spent $183,000 for a communications protocol to achieve interoperability among its utility systems. The company uses a real interest rate of 15% per year on such investments and a recovery period of 5 years. (a) What is the annual worth of the expenditure in future dollars at an inflation rate of 6% per year? (b) Write a single-cell spreadsheet function to display the correct AW value.
- A father wants to save for his eight-year-old son's college expenses. The son will enter college 10 years from now. An annual amount of $40,000 in constant dollars will be required to support the son's college expenses for four years. Assume that these college payments will be made at the beginning of each school year. The future general inflation rate is estimated to be 6% per year, and the market interest rate on the savings account will average 8% compounded annually.(a) What is the amount of the son's freshman-year expense in terms of actual dollars?(b) What is the equivalent single-sum amount at the present time for these college expenses?(c) What is the equal amount, in actual dollars, the father must save each year until his son goes to college?A father wants to save in advance for his eight-year-old daughter's college expenses. The daughter will enter the college 10 years from now. An annual amount of $20,000 in today's dollars (constant dollars) will be required to support her college expenses for four years. Assume that these college payments will be made at the beginning of each school year. (The first payment occurs at the end of 10 years.) The future general inflation rate is estimated to be 5% per year, and the interest rate on the savings account will be 8% compounded quarterly (market interest rate) during this period. If the father has decided to save only $500 (actual dollars) each quarter, how much will the daughter have to borrow to cover her freshman expenses? A. $2,683 B. $3,128 C. $2,377 D. $1,895A small heat pump now costs $2,500 to purchase and install. It has a projected useful life of years and will incur annual maintenance costs of $75 per year in real (year-zero) dollars over the useful life. These costs are projected to increase at %4 per year, which is the expected general inflation rate. The annual cost of electricity for the heat pump is $700 in year-zero dollars. Electricity prices are projected to increase at an annual rate of %9. The firm's MARR, which includes an allowance for general price inflation, is %18 per year (im). No market value is expected from the heat pump at the end of the 12 years of service life. a. What is the PW of owning and operating the heat pump? The PW is $-------- enter your response here. (Round to the nearest dollar.)b. (i) What is the AW, expressed in actual dollars, of owning and operating the heat pump? The AW is $------- enter your response here. (Round to the nearest dollar.) (ii) What is…
- The Fischer-Tropsch (F-T) process was developed in Germany in 1923 to convert synthesis gas (i.e., a mixture of hydrogen and carbon monoxide) into liquid with some gaseous hydrocarbons. Interestingly, the F-T process was used in World War II to make gasoline and other fuels. The U.S. military can save one billion gallons per year of foreign oil by blending its jet fuel with F-T products. If the government expects inflation to average 3% per year, what is the equivalent uniform annual savings in fuel? The government's MARR is 7% per year, the study period is 40 years, and one gallon of jet fuel costs $2.80. The AW is $_______billion.A small mechanical consulting company is examining its future cash flow requirements. The president expects to replace office machines and IT equipment at various times over a 6-year planning period. Specifically, the company expects to spend $6000 two years from now, $9000 three years from now, and $5000 six years from now. What is the purchasing power (with respect to today’s dollars) of each expenditure in its respective year, if the inflation rate is 4% per year?A couple wants to save for their daughter's college expense. The daughter will enter college eight years from now, and she will need $50,000, $51,000, $52,000, and $53,000 in actual dollars for four school years. Assume that these college payments will be made at the beginning of each school year. The future general inflation rate is estimated to be 7% per year, and the annual inflation-free interest rate is 6%.(a) What is the market interest rate to use in the analysis?(b) What is the equal amount, in actual dollars, the couple must save each year until their daughter goes to college?
- For many years, college cost (including tuition, fees, room, and board) increases have been higher than the inflation rate, averaging 5% to 8% per year. According to the College Board’s Trends in College Pricing, the average total costs in 2015 dollars were $19,548 for students attending in-state 4-year public colleges and universities and $43,921 for students at 4-year private colleges and universities. Assume an additional $4000 per year for textbooks, supplies, transportation, and other expenses. Using a 7% per year inflation rate, (a) how much can a sophomore high-school student expect to spend on in-state tuition, fees, room, and board for the freshman year (3 years from now) at a 4-year public university, and (b) what is the estimated total cost for the second year at the university, if textbooks, supplies, etc. also increase at 7% per year?Gillespie Gold Products, Inc., is considering the purchase of new smelting equipment. The new equipment is expected to increase production and decrease costs, with a resulting increase in profits. First cost is 40,000, savings per year is 10,000, actual useful life is 5 years, salvage value is 4000. If the average yearly inflation rate for the 5-year study period is 3.5%, what is the real-dollar ATCF that is equivalent to the actual-dollar ATCF? The base time period is year zeroLabor costs over a 4-year period have been forecast in thencurrent dollars as follows: $10,000, $12,000, $15,000, and $17,500. The general inflation rate for the 4 years is forecast to be 5%. Determine the constant-dollar labor costs for each of the 4 years.