In an effort to reduce pipe breakage, water hammer, and product agitation, a Fre

Question

In an effort to reduce pipe breakage, water hammer, and product agitation, a French chemical company plans to install several chemically resistant pulsation dampeners. The cost of the dampeners today is €111,000, but the chemical company has to wait until a permit is approved for its bidirectional port-to-plant product pipeline. The permit approval process will take at least 2 years because of the time required for preparation of an environmental impact statement. Because of intense foreign competition, the manufacturer plans to increase the price only by the inflation rate of 10% each year. Determine the cost of the dampeners in 5 years in terms of then-current euro

The cost of dampeners in terms of then-current euros is €  

Explanation / Answer

Since the price of dampners is expected to increase only by 10% per year from the current price of Euro 111,000 - in 5 years the price shall be : 111000 * (1+10%)5 = Euro 178,766.61

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