The effects of time on value
I have a design estimate for material of $80M, over 5 year period, and
the $80M included a 3% inflation rate factor per year (for years 2 threw 5). I have been ask to estimated the material cost over 4 years, but, I am having a problem calculating the inflation rate cost for the 5 year, so I can obtain my new material estimate cost. Can anyone help? |
The effects of time on value
"B~O~B" wrote:
I have a design estimate for material of $80M, over 5 year period, and the $80M included a 3% inflation rate factor per year (for years 2 threw 5). I have been ask to estimated the material cost over 4 years, but, I am having a problem calculating the inflation rate cost for the 5 year, so I can obtain my new material estimate cost. I think you want to know: what is the cost in the first year such that when the cost is inflated at 3% each year, the total after 5 years is $80M? That is equivalent to asking: what regular amount must I save annually at 3% so that the total is $80M after 5 years? The answer: =PMT(3%,5,0,-80). Note that the result is in millions because I expressed the future value in millions (80). Then the second of your question is: if I make the same regular investment annually 3% for only 4 years, what will the total be? If the PMT formula is in A1, the answer is: =FV(3%,4,-A1) To convince yourself that those formulas are correct, set up the following as a check. B1: =A1 B2: =B1*(1+3%) Copy B2 into B3:B5 =SUM(B1:B5) is the cost over 5 years. =SUM(B1:B4) is the cost over 4 years. Compare the latter with the result of the FV formula. |
All times are GMT +1. The time now is 01:39 AM. |
Powered by vBulletin® Copyright ©2000 - 2024, Jelsoft Enterprises Ltd.
ExcelBanter.com