Pace Corporation in Cookeville is considering an extended warranty on production equipment it bought recently. The extended warranty will cover repair year-end expenses of $2,000, $2,000, $4,000, and $5,000, respectively, for the next 4 years. If the interest rate is 6%, what is the worth of the extended warranty

$10,985.73

Explanation:

The worth of the extended warranty in today's terms is the present value of all year-end repair expenses expected to be incurred in extending the warranty whereby the interest rate of 6% is the appropriate discount rate in this case as shown thus:

Present value of a future cash flow=cash flow/(1+discount rate)^n

n is the year in which the cash flow is expected, it is 1 for year 1 repair expenses , 2 for year 2 and so on.

PV of repair expenses=$2000/(1+6%)^1+$2000/(1+6%)^2+$4000/(1+6%)^3+$5000/(1+6%)^4

PV of repair expenses= $10,985.73  

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi