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Sample Paper Sep-Dec-16 Question No 02 (Fernhurst Co)
I Have A problem with selling price in year 01.. why we not consider the 1 year inflation factor in your calculation of 1st year selling price? thanking you in advance..
Question..
Fernhurst Co expects to sell 132,500 units of the Milland in its first year. Sales volume is expected to increase by
20% in Year 2 and 30% in Year 3, and then be the same in Year 4 as Year 3, as the product reaches the end of its
useful life. The initial selling price in Year 1 is expected to be $100 per unit, before increasing with the rate of inflation
annually.The expected annual rate of inflation in the country in which Fernhurst Co is located is 4% in Year 1 and 5% in
Years 2 to 4But the question specifically says that the initial selling price is $100 per unit!
Thank You Sir, Appreciated.
But Sir There is also mention that selling price is before increase with the inflation rate.. why we not inflate selling price in year 1..
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