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Project Cash Flow Analysis

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Please verify that I did the problem correctly. If I didn't, please show me how to do it.

Image a is the expected after-tax cash flow for a project and the expected annual general inflaction rate during the project period.

Thank you.

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Hello!
From what you posted here, you answered correctly questions 1 and 3, but question 2 is incorrect.

The mistake was to discount (convert into equivalent constant dollars) the cash flows from year 2 and year 3 without taking in account the inflation for previous years. For example, you said that the discounted value of $26,000 in year 3 is:

26000 * (1.081)^(-3)

You're ...

Solution Summary

Project cash flow analysis for after-tax projects are determined. The expected annual general inflaction rate during the project period is examined.

$2.19