You are given the following Consumer price index for the past. 5 years. Year 1 2...

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You are given the following Consumer price index for the past. 5 years. Year 1 2 3 4 5 CPI ($) 141.6 142.3 143.1 143.9 144.4 in a) Calculate the year over year inflation for each year b) Calculate an average inflation rate that you can use to perform an economical analysis for a project in this 5-year period (4 Marks) You want to invest $1,000 in a mutual fund that offers a 4% guaranteed rate of return. Inflation is expected to be 0.75% per year. How much will you accumulate in your account in 5 years in terms of today's dollars? (5 Marks) An engineering project requires $25,000 as first cost and has a planning horizon of six years. Operating costs are $2,300 per year, and expected annual revenue is $9,200 (both real cashflow). Calculate the project's present worth if the interest rate is 5% (current), the expected annual inflation is 2% and the salvage value is $6,000 (Real). (7 Marks) ROVNO Ltd. just invested $65,000 into a new local network. Services provided by the network will bring $27,000 per year in the next five years. The following information is given: - Current MARR = 11% - expected annual inflation = 3.5% - the network will be sold for salvage after five years; its depreciation rate is 20% (Declining Balance) - All Cashflow values, including salvage, are in real dollars Is this a good investment in terms of the internal rate of return? (4 Marks) John borrowed $7,000 from a commercial bank for 6 years to pay his tuition fee. Calculate the interest owed on this loan after 6 years in real dollars if the bank charges 7% annual (current) interest rate and annual inflation is 3%. (2 Marks) A painting cost $3 million in 1980. Now in 2021 its price is $5 million. Assuming average annual inflation of 5% over this period, has the painting increased/decreased in value and by how much? (8 Marks) Canada's government savings bonds pay 2.5% annual real rate of return compounded daily. Professor Jones invests $50 weekly as a part of his university payroll program. If the inflation rate is assumed to be 3% per year over the next 12 years, what is the purchasing power of the professor's bonds 12 years from now? You are given the following Consumer price index for the past. 5 years. Year 1 2 3 4 5 CPI ($) 141.6 142.3 143.1 143.9 144.4 in a) Calculate the year over year inflation for each year b) Calculate an average inflation rate that you can use to perform an economical analysis for a project in this 5-year period (4 Marks) You want to invest $1,000 in a mutual fund that offers a 4% guaranteed rate of return. Inflation is expected to be 0.75% per year. How much will you accumulate in your account in 5 years in terms of today's dollars? (5 Marks) An engineering project requires $25,000 as first cost and has a planning horizon of six years. Operating costs are $2,300 per year, and expected annual revenue is $9,200 (both real cashflow). Calculate the project's present worth if the interest rate is 5% (current), the expected annual inflation is 2% and the salvage value is $6,000 (Real). (7 Marks) ROVNO Ltd. just invested $65,000 into a new local network. Services provided by the network will bring $27,000 per year in the next five years. The following information is given: - Current MARR = 11% - expected annual inflation = 3.5% - the network will be sold for salvage after five years; its depreciation rate is 20% (Declining Balance) - All Cashflow values, including salvage, are in real dollars Is this a good investment in terms of the internal rate of return? (4 Marks) John borrowed $7,000 from a commercial bank for 6 years to pay his tuition fee. Calculate the interest owed on this loan after 6 years in real dollars if the bank charges 7% annual (current) interest rate and annual inflation is 3%. (2 Marks) A painting cost $3 million in 1980. Now in 2021 its price is $5 million. Assuming average annual inflation of 5% over this period, has the painting increased/decreased in value and by how much? (8 Marks) Canada's government savings bonds pay 2.5% annual real rate of return compounded daily. Professor Jones invests $50 weekly as a part of his university payroll program. If the inflation rate is assumed to be 3% per year over the next 12 years, what is the purchasing power of the professor's bonds 12 years from now?

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