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23 ! Required information Factors that increase costs and prices-especially for materials and manufacturing costs sensitive to market, technology, and labor availability-can be considered separately
23
! Required information Factors that increase costs and prices-especially for materials and manufacturing costs sensitive to market, technology, and labor availability-can be considered separately using the real interest rate, i, the inflation rate, f, and additional increases that grow at a geometric rate, g (commonly due to maintenance and repair cost increases as machinery ages). The future amount is calculated based on a current estimate by using the relation F = P(1 + i)" (1 + f)"(1+g)" = P((1 + i) (1 + f) (1+g))" The current cost to manufacture an electronic subcomponent is $250,000 per year. The average annual rates for i, f, and g are 6%, 4%, and 3%, respectively Determine the equivalent future cost in 10 years. The equivalent future cost is $Step by Step Solution
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