Assignment Exercise 14-2: Cumulative Inflation Factor for Comparable Data (20 Marks)

Review Table 14-3 and the accompanying text.

Assumptions

Two hospitals report their annual projected revenue for five years to the local newspaper for a story on the areas future economic outlook. However, Hospital One has applied a cumulative inflation factor of five percent per year while Hospital Two has not applied any inflation factor. Thus the information is not properly comparable.

	Projected Revenue
	Year 1	Year 2	Year 3	Year 4	Year 5
Hospital 1	$20,000,000	$22,500,000	$27,500,000	$27,500,000	$30,000,000
Hospital 2	$20,000,000	$21,000,000	$25,000,000	$24,000,000	$26,000,000

Required

Revise Hospital 2s projections by applying a cumulative inflation factor of five percent per year.