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Real repair costs on an investment are $42599 per year growing at the inflation rate of...

Real repair costs on an investment are $42599 per year growing at the inflation rate of 2%. The nominal discount rate is 3.5%. What is the present value of these costs over 8 years?

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Answer #1
Real Discount rate = (1+ Nominal rate) /(1+Inflation rate) -1
1.035 /1.02 - 1 = 1.47%
Real
Year repair cost PVF at 1.47% Present value
1 42599 0.985513 41981.87
2 42599 0.971236 41373.67
3 42599 0.957165 40774.29
4 42599 0.943299 40183.59
5 42599 0.929633 39601.45
6 42599 0.916166 39027.74
7 42599 0.902893 38462.35
8 42599 0.889813 37905.14
Present value of repair cost 319310
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