FACC 300 Study Guide - Quiz Guide: Tax Shield, Capital Expenditure
Document Summary
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. Variations due to inflation must be removed from the prices. Therefore, convert all prices into 1990 $, the most recent year. 135 (277 / 125) = expressed in 1990 $ * multiplier: index1990 / indexyear x = 277 / indexyear x. The best way of visualising price trends is to plot the price series. Average annual rate of change from 1980 to 1986: (234 / 299)1/6 - 1 = - 4. 0 % Average annual rate of change from 1986 to 1990: (328 / 234)0. 25 - 1 = 8. 8 % Average annual rate of change from 1980 to 1990: (328 / 299)0. 1 - 1 = 0. 9 % The average annual rate of inflation over the.