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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 Summary

The unit labor cost growth rate is discovered.

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

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