1. A capital investment generates cost savings of $1,000 in 2003. Assuming these costs increase with inflation, and the inflation rate is 4 percent, what will be the cost savings in 2013?
2. The consumer price index was 158.6 at the end of 1996 and 153.9 at the end of 1995. What was the inflation rate for 1996? 10-3. The consumer price index was 161.3 at the end of 1997. At a 3 percent inflation rate, what would be the consumer price index at the end of 1998? At the end of 2007?
3. Nancy Geer is considering an Associate degree in finance. She estimates that she will forgo after tax income of $9,600 a year (she will have a part-time job), during the two years it will take her to complete the degree, but her expenses will be $3,600 a year less than if she were working. Tuition will be $10,000 at the beginning of each year.
She estimates that her income will be $4,800 a year higher, after tax, for her 40-year working life if she receives the Associate degree.
She can borrow the money needed at an interest cost of 8 percent after tax. Suppose there is 3% inflation of wages after the degree is completed. Would you recommend that she pursue the Associate degree?