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 quarter over a 5-year period. If the original cost was estimated to be $2.1 billion 5 years ago, what is the expected cost today?

The expected cost today is $ ...billion.

Answer 1

Number of quarters in 5 years = 5 x 4 = 20

Expected cost today = $2.1 billion x (1.02)²⁰ = $2.1 billion x 1.4859 = $3.12 billion