Materials cost for a product are expected to be $ 460000 per year beginning toda
ID: 2900349 • Letter: M
Question
Materials cost for a product are expected to be $ 460000 per year beginning today and continuing over the next 8 years, and maintenance costs are expected to increase by $2500 each year after the first. If the annual operator salary of $ 42000 increases by 3% each succeeding year, at an interest rate of 4% per year, estimate how much money would need to be banked now to run the operation through Year 8.
Please show ALL work and answer all parts of the question. 5 stars will be given to whoever answers completely and correctly. Thanks!
Explanation / Answer
Material Cost PV = 460000 + 460000/1.04 + 460000/1.04^2 +......460000/1.04^8
= $3,220,945.15
Similarly find Present worth of maintenance cost
and Salary and add them to get answer