In: Accounting
Solution
Case A : Worth of John D. Rockefeller
Worth in 1937 = $ 1.4 Billion
Inflation rate = CPI inflation calculator from BLS website to be used.
Worth today = ? (we need to find out )
By using calculator of inflation (CPI inflation) from Bureau of Labor Statistics website that the worth of $ 1 of August 1937 is $ 17.69 today ( i.e. August 2019).
Therefore, worth of $ 1.4 billion will be 1.4 * 17.69 = $ 24.766 billions Ans
Also the method this calculator is using can be understand by below formula :
Future value = Amount * ( 1+ r )n
where, r = inflation rate
n = number of periods
Case B
For knowing the value or purchasing power of one million dollars of 1945 today we will use the above formula :
Amount * ( 1 + r )n
where, Amount = $ 1 million
r = inflation rate ( to be taken from BLS website ) 3.6 %
n = 74 years
= $ 1 million * ( 1 + 0.0364 )74
= $ 1 million * ( 1.0364)74
= $ 1 million * 14.10
= $ 14.10 million Ans
The purchasing power of $ 14.10 million of today is equal to $1 million of 1945.