capital cost is C0 and C1, operating cost is OC. Operating costs and income are continuous years 2-5.

5. (20 pts) An investment related to developing a new product is estimated to have the following costs and revenues in "today's" or "time zero" dollars. 1=$200,000 1=$200,000 CO=$50,000 C1=$150,000 OC=$100,000 OC=$100,000 A) Evaluate the project escalated dollar ROR if both capital costs and operating costs are estimated to escalate at 12% per year from time zero with income escalating at 8% per year. B) Make constant dollar ROR Analysis of Case "A" assuming the rate of inflation for the next 5 years will be 6% per year