At time 1 they are 170 x 1.04 = 177 At time 2 they are 170 x 1.04^2 = 184 and so on

(although rather than keep repeating the arithmetic, it is somewhat quicker to saw that time 2 is 177 plus another 4%. i,e, 177 x 1.04 = 184. But it doesn’t matter how you do it.)

Hello Mr Moffat, please I was wondering why in this question 4a in part i, under the NPV computation….when calculating the sales price and the variable cost, you applied the rate of inflation (increase) and raised the figures to the power of the years e.g in year 2, you did 70x$20x (1.03)^2, etc. but when you inflating the fixed costs, you simply did not?

John Moffat says

Bit I did!!!

Fixed costs are 170 at current prices.

At time 1 they are 170 x 1.04 = 177

At time 2 they are 170 x 1.04^2 = 184

and so on

(although rather than keep repeating the arithmetic, it is somewhat quicker to saw that time 2 is 177 plus another 4%. i,e, 177 x 1.04 = 184. But it doesn’t matter how you do it.)

glodan123 says

Thank you sir

John Moffat says

You are welcome 馃檪

glodan123 says

Hello Mr Moffat, please I was wondering why in this question 4a in part i, under the NPV computation….when calculating the sales price and the variable cost, you applied the rate of inflation (increase) and raised the figures to the power of the years e.g in year 2, you did 70x$20x (1.03)^2, etc. but when you inflating the fixed costs, you simply did not?