FACC 300 Lecture 8: tutorial_8
30 Nov 2017
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The current money price of a commodity has evolved as shown in the table below. Using the gdp index as a measure of inflation, determine how the real price of the commodity has evolved over the period. Equipment has the following cost characteristics, expressed in constant money of the time of purchase: 15 percent: initial cost: 000, operating expenses: 000 in year 1, increasing at an annual rate of, salvage value: 000 (valued in current money of the time of, life: 8 years disposal) The equipment is to be depreciated by the declining-balance method at an annual rate of 20 percent (assume the canadian pool system but ignore the half-year rule). The corporate income tax rate is 45 percent. Assume a constant money cost of capital of 10 percent and an annual rate of inflation of 7 percent.
