Metalfab Pump and Filter Inc. estimates that the cost of steel bodies for pressure valves will increase by $2 every 3 months. If the cost for the first quarter is expected to be $80. What is the present worth of the costs for a 5-year time period at an interest rate of 1.1% per quarter?

Question

Business

Jerimiah Acosta

28 February, 18:15

Metalfab Pump and Filter Inc. estimates that the cost of steel bodies for pressure valves will increase by $2 every 3 months. If the cost for the first quarter is expected to be $80. What is the present worth of the costs for a 5-year time period at an interest rate of 1.1% per quarter?

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Oswaldo Mendoza · Answer 1

Present value = $96.42

Explanation:

Giving the following information:

Metalfab Pump and Filter Inc. estimates that the cost of steel bodies for pressure valves will increase by $2 every 3 months. If the cost for the first quarter is expected to be $80.

First, we need to calculate the final cost at the end of the period:

n = 5*4 = 20

Final cost = 80 * (2*20) = 120

Now, we can calculate the present value:

PV = FV / (1+i) ^n

PV = 120 / (1.011^20) = $96.42