Aquatech Microsystems spent $183,000 for a communications protocol to achieve interoperability among its utility systems. The company uses a real interest rate of 15% per year on such investments and a recovery period of 5 years. (a) What is the annual worth of the expenditure in future dollars at an inflation rate of 6% per year? (b) Write a single-cell spreadsheet function to display the correct AW value.
What will be an ideal response?
if = 0.15 + 0.06 + (0.15)(0.06) = 0.219 (21.9%)
AW = 183,000(A/P,21.9%,5)
= 183,000(0.34846)
= $63,768
Function: = - PMT(0.15+0.06+0.15*0.06,5,183000) displays the same AW value
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