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.© BrainMass Inc. brainmass.com October 9, 2019, 5:22 pm ad1c9bdddf
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)
Project cash flow analysis for after-tax projects are determined. The expected annual general inflaction rate during the project period is examined.