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To produce something one needs to buy materials and use labour. How come the current price of materials and labour is not the price for the first year (unlike the selling price)? Is it the price of year -1 -0?
Thank you in advance.
If we are evaluating a new project we will look at what costs are currently when estimating the future flows. However costs will not be incurred until the project has started and so the first costs will be next year and by next year they will be higher due to inflation.
You are welcome 🙂