Global steel prices have a year-over-year inflationary rate increase of 12.4%. Tube Fab purchased $700,000 of a particular carbon steel during the year just ended right now. Their business has been increasing and they intend to purchase 20% more steel each year, over the previous year’s purchase, for the next 5 years. Tube Fab earns a real rate of 9.0% on their money.
a) Determine the then-current amounts they will pay for steel at the end of each of the next 5 years.
b) Determine the constant-value amounts they will pay for steel at the end of each of the next 5 years.
c) Determine Tube Fab’s PW of expenditures over the next 5 years using then-current dollars.
d) Determine Tube Fab’s PW of expenditures over the next 5 years using constant-value dollars.