Sir while attempting this question I inflated the normal way: Original Sales price x Sales Volume x Exchange rate x Inflation rate
In the examiners answers however, the variables (costs and sales price) have been inflated and rounded off before being used to calculate the totals.
My NPV ended up being 0.6 million more than the MS. I triple checked all my calculations to make sure the difference was only because of this inflating issue. Was my approach ok, or was I supposed to do it the other way? A sales price of 772 Euros does sound more practical than 771.75 (700 x 1.03^2)… 🙂