Question

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 1.42% per quarter?

The present worth is $  .

Answer 1

Number of quarters = 5 x 4 = 20

Present worth is computed as follows.

PV Factor in quarter N = (1.0142)^-N

Quarter	Cost ($)	PV Factor @1.42%	Discounted Cost ($)
	(A)	(B)	(A) x (B)
1	80	0.9860	78.88
2	82	0.9722	79.72
3	84	0.9586	80.52
4	86	0.9452	81.28
5	88	0.9319	82.01
6	90	0.9189	82.70
7	92	0.9060	83.35
8	94	0.8933	83.97
9	96	0.8808	84.56
10	98	0.8685	85.11
11	100	0.8563	85.63
12	102	0.8443	86.12
13	104	0.8325	86.58
14	106	0.8209	87.01
15	108	0.8094	87.41
16	110	0.7980	87.78
17	112	0.7869	88.13
18	114	0.7758	88.45
19	116	0.7650	88.74
20	118	0.7543	89.00
		Present Worth ($) =	1696.97