A self-employed chemical engineer is on contract with Dow Chemical, currently working in arelatively high-inflation country...

 

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A self-employed chemical engineer is on contract with Dow Chemical, currently working in arelatively high-inflation country in Central America. She wishes to calculate a project's PW with estimated costs of $30,000 now and $6,500 per year for 7 years beginning 1 year from now with increases of 10% per year thereafter for the next 6 years. Use a real interest rate of 6% per year to make the calculations (o) without an adjustment for inflation and (b) considering inflation at a rate of 3% per year. A self-employed chemical engineer is on contract with Dow Chemical, currently working in arelatively high-inflation country in Central America. She wishes to calculate a project's PW with estimated costs of $30,000 now and $6,500 per year for 7 years beginning 1 year from now with increases of 10% per year thereafter for the next 6 years. Use a real interest rate of 6% per year to make the calculations (o) without an adjustment for inflation and (b) considering inflation at a rate of 3% per year.

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To calculate the present worth PW of the project we need to discount the future cash flows to their ... View the full answer