Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 63

A machine currently under consideration by Holzmann Industries has a cost of $45,000. When the purchasing manager complained that a similar machine the company purchased 5 years ago was much cheaper, the salesman responded that the cost of the machine has increased solely in accordance with the inflation rate, which has averaged 3% per year. When the purchasing manager checked the invoice for the machine he purchased 5 years ago, he saw that the price was $29,000. Was the salesman telling the truth about the increase in the cost of the machine If not, what should the machine cost now, provided the price increased by only the inflation rate