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A company will begin automating portions of its assembly line 4 years from today. The cost at that time is expected to be $5.2 million.
A company will begin automating portions of its assembly line 4 years from today. The cost at that time is expected to be $5.2 million. The company tries to achieve a real return of 8% on any money it invests. The annual inflation rate over the time horizon is expected to be 3.5%. Given its desired real return and expected inflation, when the company compares investment funds, what inflation-adjusted interest rate should the company look for? Give your final answer to the nearest hundredth of a percent.
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