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

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Thibault St john Cholmondeley-ffeatherstonehaugh the 2ndCommented:
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.
easycapitalAuthor 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.

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.
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ProfessorJimJamMicrosoft 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


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easycapitalAuthor Commented:
Dear Experts,

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

Martin LissOlder 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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