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Regarding J12Q1 part a. (ACCA past exams)
In the revenue calculation part, I am confusing within calculating the yearly inflation of 4% , as normally I have to take the yearly selling price * by 4% while within the answer some times he multiply the selling rate per year and some other he use last year rate and multiply by the 4%.
But he has dealt with the inflation in the way that we always do!
The selling prices in the question are at current prices and therefore need inflating.
So for year 1, the current selling price is 25.00. Inflated for 1 year gives 25.00 x 1.04 = 26.00
For year 2, the current selling price is 24.00. Inflated for 2 years gives 24.00 x (1.04^2) = 25.96
and so on.
It will help you to watch my free lectures on investment appraisal with inflation. The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
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