# Financial: price discount and cost escalation

Dear expert,

Any suggestion on how to illustrate a:
- price discount say 1% per year for the next 5 years.
- a cost escalation of 2,5% per years for the next 5 years.

Price discount:
Base price 100 USD
Year 1 99 USD
Year 2 98,01 USD
Year 3 97,029 USD
Year 4 96,058 USD
Year 5 95,098

Br,
Juan
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Commented:
It's not very clear what you are asking.
You have demonstrated the 1% reduction over 5 years. You could do the same with the 2.5% increase?
Or you could combine the increase and the reduction and show the final effect on the values?
If this is describing a real world situation a little more detail would help get an answer.
Author Commented:
Dear expert,

Looking for an effective way to show a price volume discount through the years and as part of this I would like to show that this price is taking into account the cost increase.

Br
JP
Commented:
Are you referring to the price you are having to pay for the items that you are selling?
Example the items you are buying go up in price 2.5% each but you wish to give a 1% discount to your buyers?

The 1% drop in price over 5 years leaves it as \$95.098.
Instead of fooling with pennies just give a \$1 discount each year. The end result after 5 years would be \$95.00 even and that should not break the bank.

If prices are going up 2.5% then:
\$100 = \$102.50
\$102.50 = \$105.0625
\$105.0625 = \$107.689
\$107.689 = \$110.381
\$110.381 = \$113.14

There are easier mathematical ways to do price increases and price drops than 1% and 2.5%. They work fine the first year but not after.

What are the items you are buying and selling? If the margins are that tight (up 1.5% each year) then you may have other issues.
Microsoft Excel ExpertCommented:
Please see attached example in Excel.

Price of \$100 duration of 5 years with a 2.5% escalation factor and discount rate of 1% is equivalent to a flat rate of \$105.07

Book1.xlsx

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Author Commented:
Dear Experts,

The mathematics are great. I am looking for a way to illustrate in a convincing way the above info.

Br
Juan
Older than dirtCommented:
This question has been classified as abandoned and is closed as part of the Cleanup Program. See the recommendation for more details.
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