[OPE-L:7382] [OPE-L:912] Discounted Prime Costs (Correction)

John R. Ernst (ernst@PIPELINE.COM)
Thu, 15 Apr 1999 21:23:01

Paul, RE: OPE-L 882

Here's a correction to the equation in my prior post on this topic:
The equation should read:


The first 4 terms on the right hand side now have 50 in their numerators
as this is the amount available for depreciation and profit. The other
40 go to the circulating costs in the next period and are not recovered
till the end of the 5th period. Hence, 130 is the numerator for the
5th term of the equation. With this equation, I got 9.1% as the rate
of return. For the "new" technique with similar corrections, I computed
a rate of return of 6.7%.