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Omega Instruments has budgeted $300,000 per year to pay for certain ceramic parts over the next 5 years. If the company expects the cost of the parts to increase uniformly according to an arithmetic gradient of $10,000 per year, what is it expecting the cost to be in year 1, if the interest rate is 10% per year?

Respuesta :

AyAyCapitan

Answer:

281,281.28

Explanation:

expected cost  300,000 + 10,000 = 310,000

with an inerest rate of 10%

discount value equals to 281,281.28

anthougo

Omega Instruments is expecting the cost of the parts to be $341,000 in Year 1.

Data and Calculations:

Annual budgeted payment for ceramic parts =$300,000

Period of budget = 5 years

Expected increase in the cost of the parts = $10,000 per year

Price of the parts in Year 1 = $310,000 ($300,000 + $10,000)

Interest rate per year = 10%

Expected cost of the ceramic parts in Year 1 based on 10% interest rate = $341,000 ($310,000 x 1.1)

Thus, Omega Instruments expects the cost of the parts to rise to $341,000 in Year 1.

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