Assume current inflation is 5% a year, what is the price tag in six years for an

Question

Assume current inflation is 5% a year, what is the price tag in six years for an item that has inflation rate of 4% and that costs $400 today? Question 1 options: $506.1 C $423.6 $377.6 C $320.0 0 C $500.0 Save Question 2 (1 point) It is known that the inflation rate over next three years is expected to be 5% in the first year, 10% in the second and 15% in the third. In such a case, average expected annual inflation rate is Question 2 options: 5.00% 10.00 ? 15.00 ? 9.92% ? 10.08 Save Question 3 (1 point) If interest rate is 10%, the depreciation rate is 10%, service life is 10 years and first cost is $10 million then EAC(Capital) is Question 3 options $1.000 million ? $1,977 million ? $1.349 million $1.409 million $1.060 million

Explanation / Answer

Solution 1: the future cost is calculated below:

Price after 6 year = 400 (1+0.04)^6 = 506.13

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