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Math Help - [SOLVED] How to Figure the compounding Inflation rate over time?

  1. #1
    maharas
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    [SOLVED] How to Figure the compounding Inflation rate over time?

    I'm trying to figure out how to setup an equation for figuring out what the future value of a utility's usage rate will be over time. For example I want to know how much electricity in dollars a light bulb will consume over its life time taking into account real inflation costs on an electrical rate. Given that Inflation = 4%, Time=10 years, Electrical rate = .11/kilowatt hr, Lamp hrs=10,000, Lamp power usage/hr = 23w


    (10,000 hours x $0.11 per Kwh x 23W)/1000= $25.30 worth of consumed electricity over its life time, but I can figure out how to apply the rising cost of the electrical rate due to inflation over the bulb's 10 year life.


    I have tried using the formula I=PeRT as well as I=PRT and can't seem to find a solution. Can anyone shed some light on this problem?
    Thanks
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  2. #2
    Senior Member topher0805's Avatar
    Joined
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    Well, you have a good starting point. You have already figured out that $23.50 is the amount of money that it will cost to use a light bulb for 10 years, assuming there is no inflation.

    So, divide that number by 10 to get the amount of money it will cost for 1 year of use.

    Now that you have the amount in one year, $2.35, you can use the compound interest formula to find the amount of money used during the other years and simply add them together.

    Total Cost = 2.35 + 2.35(1.04) + 2.35(1.04)^2 + 2.35(1.04)^3 + 2.35(1.04)^4.....

    There is a way to represent this using this , but I am not sure how to use LaTex to do that, so I will let you find this yourself.
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