Sam\'s Bakery earned $100,000 last year. Sam expects his prices to increase an a
ID: 2649744 • Letter: S
Question
Sam's Bakery earned $100,000 last year. Sam expects his prices to increase an average annual rate of 6.5% per year for the next 4 years, general inflation is 3.6%. Sam expects his production level to remain the same for the next four years. Nominal MARR is 12%.
a. Calculate Sam's bakery revenues in nominal dollars for the next four years and also calculate the present value of Sam's bakery revenue.
Bakery revenue(nominal)
year1:
year2:
year3:
year4:
PV1-4=
b. Calculate bakery revenue in inflation-adjusted real dollars over the next four years and the Present value as well.
Bakery revenue(real)
year1:
year2:
year3:
year4:
PV1-4=
Explanation / Answer
a.
Revenue in nominal dollar: This is the change in revenue for increase in price only.
Year 1: $100,000 + ($100,000
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