Return on Software: Maximizing the Return on Your Software Investment

Chapter 13 Self-Study Questions

2.	Price Index = ($1.50 / $1.00) * 100 = 150
3.	$60 * 150 / 100 = $90
6.	Annual inflation rate = (106.6 – 105.8) / 105.8 = 0.076 = 0.76%
8.	Average annual inflation rate = 10th root of (105.8 / 88.0) – 1 = 0.0186 = 1.86%
10.	k-bar = 1 – 10th root (13.0 / 23.8) = 5.9%. To show how the loss of purchasing power and inflation are related, 1/(1 – 0.059) = 1 – 0.062.
12.	12a. F = P (F/P,9,15) = $7,500 (3.642) = $27,315.00 12b. i' = [(1 + 0.090) / (1 + 0.048)] – 1 = 4.0% 12c. F' = P (F/P,4,15) = $7,500 (1.801) = $13,507.50 12d. Actual dollars = (1 + 0.048) ^ 15 * $13,507.50 = $27,289.41 (which is close enough to $27,315)
14.	Year Actual Dollar Cash Flow Present-Worth Factor Constant dollar Cash Flow 0 –$10,000 P/F,4,0 (1.000) –$10,000 1 –$850 ...