What is the capital expense amount reflected on the cash flow for March Year 3, considering a 3% inflation for the first two years?

To arrive at the capital expense amount for March Year 3 while considering the impact of a 3% inflation rate over the first two years, the calculation involves applying that inflation rate cumulatively over the specified period.

Assuming the original capital expense amount for Year 1 is $60,000, we first apply the inflation for Year 1. The calculation for Year 1 with a 3% inflation increase is:

Year 1 amount = $60,000 * (1 + 0.03) = $60,000 * 1.03 = $61,800.

Next, we apply the inflation again for Year 2. The calculation for Year 2 goes as follows:

Year 2 amount = $61,800 * (1 + 0.03) = $61,800 * 1.03 = $63,654.

Now we have the capital expense amount for March Year 3, reflecting the compounded inflation over the first two years, which totals $63,654. This amount accurately accounts for the inflation effects and represents the increased capital expense resulting from the cumulative 3% inflation rate over the two years.

Therefore, the amount reflected in the cash flow for March Year 3, considering the