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    unit labor cost growth rate

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    Cost for a good has increased from $80 to $100 per unit over the previous three years. A person thinks that importing the product from foreign suppliers at a cost of $115.90 per unit may soon be desirable.

    A. Calculate the companies unit labor cost growth rate using the constant rate of change model with continuous compounding.

    B. Forecast when unit labor costs will equal the current cost of importing.

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    Solution Preview

    Part a)
    Under continuous compounding, we know that
    FV= PV*e^r*t
    FV=Future Value
    PV=Present Value
    e=exponential function
    ^ means raised to the power of
    r=growth rate
    Here we ...

    Solution Summary

    The unit labor cost growth rate is discovered.