Hello everyone,
I was wondering if some of you guys could help me understand what the Discount factor is for the following below ?
CKHats will be selling for $25, VC is $10 for every unit. Both the SP, VC are in current price, and the SP inflation will be forcasted to 5% every year.
Also VC inflation will be 6% and there is no increase in fixed costs. Now Producing and selling CKHats will mean increase in Working Capital and also every year
investment in the working capital for CKHats will be 8% of the sales revenue for that year. Tax 30%, machinery can be claimed using straightline over a 6
year period it has no scap value and after tax cost of capital is 15% for investment appraisal.
Now my question to you guys is what will be my discount factor be I assumed it would be the 15% just not sure, also I haven't written down the
whole question as I would like to attempt it myself.
Many thanks.
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if this is a homework question there is an area for this
There is an area on the website for students to ask for help on homework questions etc. The any answers area should really only be used for real life situation questions.