A Division of Dow Chemical wants to set aside money now so that it can purchase new air fin coolers three years from now. The total cost now is

$45,000. The price of the coolers is expected to increase only by the inflation rate of 3.7% per year for each of the next three years. Dow earns interest at a market rate of 8% per year on its investments.

(a) What is the coolers’ cost expected to be three years from now?

(b) How much will the company have to set aside now to buy the coolers in 3 years?

(c) If the $45,000 is set aside now, how much money will be available in 3 years to pay for the coolers?