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Hello sir good evening,
Part a working 7 in calculating additional tax, contributions and opportinity cost. Could you please suggest how the additional contributions of 34, 63, 140 and 184 in year 1, 2, 3 and 4 was arrived at. It will be a great help. Thank youIt does give the formula in the bottom but I can’t get where he got these figures from for this formula Thanks
I am away from home at the moment and so don’t have access to the question.
I get home late tonight and so I will answer you tomorrow. Remind me 🙂
I am not home yet, but I have found the question 🙂
The question says that the sales will be 12,000 units in the first year, 22,000 in the second year, and so on.
The contribution to Tramont on the components bought from Tramont is $4 per unit, and there will be tax on it of 30%.
So in the first year it is 12 x $4 x 0.7 = 34
According to the question there is inflation at 3%, so in the second year it is 22 x $4 x 1.03 x 0.7 = 63
Similarly for the other two years.
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