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Relating to the question above, why does inflation start in year 2 for the cost? in what cases do we start inflating from year 1. Ive been quite confused on this
Thanks in advance
The question says “The following revenues and costs apply to the first year of operation”.
Because of this, they are the actual flows in the first year and only inflate in later years.
If the question had said that the flows were at “current costs” then the inflation would have occurred in the first year as well.
Thanks alot, Ive noted that one
You are welcome 🙂