Question

Because testing of nuclear bombs was halted internationally in 1992, the Department of Energy has developed a laser system that allows engineers to simulate (in a laboratory) conditions in a thermonuclear reaction. Due to soaring cost overruns, a congressional committee undertook an investigation and discovered that the estimated development cost of the project increased at an average rate of 2% per month over a 5-year period. If the original cost was estimated to be $2.5 billion 5 years ago, what is the expected cost today? The expected cost today is $ billion.

Answer 1

rate positively ..

We can solve the increase in cost by compounding formula
Future value =		2.5*(1+2%)^5
		$     2.76	billion
Therefore expected cost today =				$     2.76	billion