Suppose That the Annual Rate of Inflation Averages 4% Over $\leq t \leq$

question 39

Multiple Choice

Suppose that the annual rate of inflation averages 4% over the next 10 years. With this rate of inflation, the approximate cost C of goods or services during any year in that decade will be given by C(t) = P(1.04) t, 0 $\leq t \leq$ 10 where t is time in years and P is the present cost. If the price of an oil change for your car is presently $\$$ 24.95, estimate the price 9 years from now. Round your answer to two decimal places.

• A) \(\$\) 36.93
• B) \(\$\) 37.51
• C) \(\$\) 38.93
• D) \(\$\) 40.51
• E) \(\$\) 35.51

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Definitions:

Analytical Methods

Techniques and procedures used to break down complex material or data into simpler parts to understand it better or reach conclusions.

Cash Flows

The full measure of financial transactions entering and leaving a business, essentially shaping its liquidity factor.

Discounted Cash Flow

An investment appraisal technique that values a project or an asset based on the present value of its expected future cash flows.

Valuation

The process of determining the present value of an asset or a company based on earnings, assets, and market comparisons.