ACCA FM · Chapter 7 · Question 4 of 10
A project will sell 10,000 units in year 2. The current selling price is $25 per unit, and selling prices are expected to rise by 4% a year. What is the year 2 sales revenue in money terms (to the nearest $)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $270,400
Explanation
Year 2 revenue = 10,000 x $25 x 1.04^2 = 10,000 x $27.04 = $270,400. The price must be inflated for two years because the current price is a time 0 price. Inflating for only one year gives $260,000.
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