Basril Co – not a past exam question

Hi John,

In this question they are asking to calculate the NPV of 3 different projects and then using divisible/non divisible approaches see which projects should be accepted.

In the scenario for both projects 1 & 2 the commentary states that the costs are in money terms – this suggests to me that they are already inflated.

Exact wording –
Project 1 – Savings in labour costs from these assessments in money terms are expected to be as follows…

Projects 2 – An investment of $450k in individual workstations for staff that is expected to reduce admin costs by $140.8k per annum in money terms for the next 5 years

I did not inflate these costs as it said they were in money terms but the answer in the back of the book has?

I thought that money terms is the same as nominal terms and includes inflation but current price terms needs inflating!

Thanks for the help
Graham