​(Inflation and project cash​ flows)  If the price of a gallon of regular gasoline is ​$2.49 and the anticipated rate of inflation in energy prices is such that the cost of gasoline is expected to rise by 5 percent per​ year, what is the expected price per gallon in 10 years?The expected price per gallon of gas in 10 years is ​$​(Round to two decimal​ places.)

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Asked Nov 11, 2019
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​(Inflation and project cash​ flows)  

If the price of a gallon of regular gasoline is ​$2.49 and the anticipated rate of inflation in energy prices is such that the cost of gasoline is expected to rise by 5 percent per​ year, what is the expected price per gallon in 10 years?

The expected price per gallon of gas in 10 years is ​$

​(Round to two decimal​ places.)

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Expert Answer

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Step 1

Future value can be defined as the worth of a present monetary value on a future specified date at a fixed interest rate.

Step 2

The expected price can be calculated with the help of below expression:

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Future value Present value x (1+ i) Here, is interest rate n is number of years

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Step 3

Substitute $2.49 for present value, 5% for...

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10 Future value $2.49 x (1+ 5%) $2.49x(1.62889) =$4.05

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