Inflation

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June 3, 2017 at 1:27 pm #389921
lusan
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$110,000 per annum expected in current price term and these are expected to increase by 4% per annum due to inflation during four years life of equipment

do i need to increase $110,000 @ 1.04 from year 1?
June 3, 2017 at 5:17 pm #389970
John Moffat
Keymaster
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Yes. Because the flows are at current prices, the flow at time 1 will be 110,000 x 1.04, at time 2 it will be 110,000 x 1.04^2, and so on.

I do suggest that you watch my free lectures on this.
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