Problem 10.42
A European-based cattle genetics engineering research lab is planning for a major
expenditure on research equipment. The lab needs $5 million of today’s dollars so it can
make the acquisition 4 years from now. The inflation rate is steady at 5% per year.
(a) How many future dollars will be needed when the equipment is purchased, if
purchasing power is maintained? (b) What is the required amount of the annual deposit
into a fund that earns the market rate of 10% per year to ensure that the amount
calculated in part (a) is accumulated?