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In the december 2023 question Mckeever Co., why are we not including the transfer price of £20 per unit in the NPV calculation?
There are two aspects to it.
Firstly, when arriving at the cash flows in Eritrea, the contribution of 175 pounds per unit (before inflating) is after variable costs which include the 20 pounds per unit.
Secondly, when arriving at the $ cash flows we bring in the contribution earned on the transfers (the net of the transfer price and the cost of producing).
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