The income and expenses Mr. Smith Incurs this year:
Income: $40,000
Project Cost this year: $30,000
Consumes: $50,000
Consumption this year = $40,000 - $30,000 - $50,000
Consumption this year = -$40,000
Future value of the conumption this year = -$40,000*1.1 = -$44,000
Consumption next year:
Income : $60,000
Income from the project: $36,000
Total income next year = $96,000
Consumption next year = -$44,000 + $96,000
<u>Consumption next year = $52,000</u>
Thus consumption next year is $52,000
