Chap 8 examples0

# Chap 8 examples0 - Example 1 Table shows salary earned over...

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Example 1 Table shows salary earned over 4 years. Find annual salaries in year zero dollars (b=0). Inflation rate has been constant at 6% a year. End of Year A\$ Salary 1 34,000 2 36,200 3 38,800 4 41,500 Chap 8 examples

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Example 2 Incredible shrinking \$50 bill in 1957, worth \$50 then, is worth \$6.58 in 2007. a) What was the compounded average annual inflation rate? b) \$50 invested in stock market in 1957 was worth \$1,952 in 2007. Given a), what was annual real interest rate earned on this investment? Chap 8 examples
Example 3 Annual expenses for 2 alternatives given: Average inflation is 6% a year and real rate of interest is 9% a year. Chap 8 examples End of year A (A\$) B (R\$, with b = 0) 1 120,000 100,000 2 132,000 110,000 3 148,000 120,000 4 160,000 130,000

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Two medical devices. Device A costs \$100,000, device B costs \$150,000. Cost of maintenance for A is \$5,000 and B is \$3,000 in 1 st year. Costs expected to increase at 10% a year. 6-year study period to be used. Income tax
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## This note was uploaded on 02/07/2012 for the course IE 343 taught by Professor Vincent,g during the Spring '08 term at Purdue University-West Lafayette.

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Chap 8 examples0 - Example 1 Table shows salary earned over...

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