Question

3. Inflation in project analysis Aa Aa E It is often easy to overlook the impact of inflation on the net present value of the project. Not incorporating the impact of inflation in determining the value of the cash flows of the project can result in erroneous estimations. Consider the following scenario: Sto Associates Co. is considering opening a new division to produce units that it expects to sell at a price of $12,990 each in the first year of the project. The company expects the cost of producing each unit to be $7,100 in the first year; however, it expects the selling price and cost per unit to increase by 1% each year. Based on the preceding information, the company expects the selling price in the fourth year of the project to be and it expects the cost per unit in the fourth year of the project to be

Please only answer if you know the answer to it.

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

- 2x projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Calibri 11 AA = = = pt Wrap Text General Ea Copy Paste BI U D- DA SF Merge Merge & Center - Center $ % % , 4:0 .00 :.: Conditional Format Format Painter Cell Insert Delete Format Formatting as Table Styles Clipboard Font Alignment Number Styles Cells Σ AutoSum : A Fill 2 Sort & 2 Clear Filter Editing Find & Select - for LK749 LI LK LL LM LN LO LP LQ LR L S LT 739 740 741 742 743 744 745 746 747 PRICE IN YEAR 1 COST IN YEAR 1 12990 7100 ANSWER PRICE IN YEAR 4 COST IN YEAR 4 13383.61 ROUNDED --> 7315.14 ROUNDED --> 13384 12990*(1+0.01)^3 7315 7100*(1+0.01)^3 748 749 750 751 752 753 754 755 756 757 758 750 R N invest, EAA MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND O IRRnpvbetaRATION PBP ARR ferences: E147 OPTION TO WAITSTEIN IDI BOU 120% D- Rea 2. B 19 . * 10 ENG 30-11-2019