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Tough PS <Experts Please Help>

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by voodoo_child » Tue Oct 04, 2011 3:53 am
If a 5-year construction project is structured to double the investment every succeeding year, what percentage of the total cost was invested in the first year?

a 12.5%
b 10%
c 8.25%
d 5%
e 3%


OA - E

Here's what I did;

Investment in the first year - 100 => 200 => 400 => 800 => 1600.

% of total cost = 100/1600=6.25%

However, OE says that total cost = 100+200+400+800+3100 ...Not sure why is OE adding all investments. Essentially, for a five year, perpetuity (Say), one cannot withdraw the investment in the middle of timeframe. Secondly, $200 get re-invested. Why are we considering it cost? Can anyone please explain? :(

thanks
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by sl750 » Tue Oct 04, 2011 4:22 am
The question says "What percentage of the total costs was invested in the first year. Hence, we add the investments of all 5 years

1st year=x; 2nd year=2x; 3rd year=4x; 4th year=8x; 5th year=16x

Total investment = 31x

(x/31x)*100 =~ 3.2%
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by Abhishek009 » Tue Oct 04, 2011 4:41 am
voodoo_child wrote:If a 5-year construction project is structured to double the investment every succeeding year, what percentage of the total cost was invested in the first year?

a 12.5%
b 10%
c 8.25%
d 5%
e 3%


OA - E

Here's what I did;

Investment in the first year - 100 => 200 => 400 => 800 => 1600.

% of total cost = 100/1600=6.25%

However, OE says that total cost = 100+200+400+800+3100 ...Not sure why is OE adding all investments. Essentially, for a five year, perpetuity (Say), one cannot withdraw the investment in the middle of timeframe. Secondly, $200 get re-invested. Why are we considering it cost? Can anyone please explain? :(

thanks
Investments-

Year 1 = x

Year 2 = 2x

Year 3 = 4x

Year 4 = 8x

Year 5 = 16 x


Total Investment in these 5 years is x + 2x + 4x +8x + 16x = 31x

Now we are asked to find out :

what percentage of the total cost was invested in the first year

Investment in Year 1 / Total Investment * 100

x /31x *100 = ~ 3.xxx%
Abhishek
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by GMAT_1986_subha » Tue Oct 04, 2011 6:45 am
voodoo_child wrote:If a 5-year construction project is structured to double the investment every succeeding year, what percentage of the total cost was invested in the first year?

a 12.5%
b 10%
c 8.25%
d 5%
e 3%


OA - E

Here's what I did;

Investment in the first year - 100 => 200 => 400 => 800 => 1600.

% of total cost = 100/1600=6.25%

However, OE says that total cost = 100+200+400+800+3100 ...Not sure why is OE adding all investments. Essentially, for a five year, perpetuity (Say), one cannot withdraw the investment in the middle of timeframe. Secondly, $200 get re-invested. Why are we considering it cost? Can anyone please explain? :(

thanks
Well your mistake is 1600 is 5th year cost, the percentage should be summation of all 5 year projects.

As per your calculation - the total cost is 3100. not 1600...

Just a suggestion as your mistake in this problem - Read very carefully the question. That's the greatest GMAT trick used
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