Engineering Economics Blog

Manufacturers make backup batteries for computer systems available to Batteries + dealers through privately owned distributorships. In general, batteries are stored throughout the year, and a 5% cost increase is added each year to cover the inventory carrying charge for the distributorship owner. Assume you own the City Center Batteries + outlet. Make the calculations necessary to show which of the following statements are true and which are false about battery costs.
 
  (a)    The amount of $98 now is equivalent to a cost of $105.60 one year from now. 
  (b)    A truck battery cost of $200 one year ago is equivalent to $205 now. 
   (c)    A $38 cost now is equivalent to $39.90 one year from now. 
  (d)    A $3000 cost now is equivalent to $2887.14 one year earlier. 
  (e)    The carrying charge accumulated in 1 year on an investment of $20,000 worth of  batteries  is  $1000.  

Solution