A quadrupole mass spectrometer can be purchased today for $85,000. The owner of a mineral analysis laboratory expects the cost to increase exactly by the specialty laboratory equipment cost index over the next 10 years. (a) If the specialty equipment in­flation rate is estimated to be 2% per year for the next 3 years and 5% per year thereafter, how much will the spectrometer cost in 10 years? (b) If the ap­plicable cost index is 1203 now, what will the index be 10 years from now at the expected inflation rates?

What will be an ideal response?


(a) Cost10 = 85,000 (1+0.02)³ (1+0.05)? = $126,924

(b) 126,924 = 85,000(I10/1203)
I10 = 1796.35

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