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16 February, 00:24

Metalfab Pump and Filter Inc. estimates that the cost of steel bodies for pressure valves will increase by $2 every 3 months. If the cost for the first quarter is expected to be $80. What is the present worth of the costs for a 5-year time period at an interest rate of 1.1% per quarter?

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  1. 16 February, 00:46
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    Present value = $96.42

    Explanation:

    Giving the following information:

    Metalfab Pump and Filter Inc. estimates that the cost of steel bodies for pressure valves will increase by $2 every 3 months. If the cost for the first quarter is expected to be $80.

    First, we need to calculate the final cost at the end of the period:

    n = 5*4 = 20

    Final cost = 80 * (2*20) = 120

    Now, we can calculate the present value:

    PV = FV / (1+i) ^n

    PV = 120 / (1.011^20) = $96.42
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