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Question 3.B: The manufacturer of commercial jets has a cost index equal t...

The manufacturer of  commercial  jets has  a cost index  equal to  94.9 per  aircraft in  2013. The anticipated cost index for the  airplane in  2018 is 106.8. The  average  compound  rate of growth  should  hold  steady  for the next 15  years. If an aircraft costs  $10.2  million to build in 2014, what is its expected cost in 2016?  State your assumptions. (3.3)

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The average compound rate of growth is 2.4% per year.
C_{2016} = C_{2014}  [(1 + 0.24)²] or  C _{2014}  = $10.2(1.0486) = $10.7 million

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