Inflation

Inflation Example Given: Acme Axles needs a heat treating oven for its account with Deutschmobile AG. An electric oven and natural-gas fired oven are considered. For both options assume a tax rate of 34%, 7-year depreciation, a 10-year life, no tax credits, salvage value of 10% of first cost, discount rate of 10%, inflation rate of 4%, electricity inflation rate of 5%, and natural gas inflation rate of 7%, All costs of the two ovens are identical except for the following: ME 416/516