EOM1 - Contingency equivalent Inflation problem

I'm having some difficulty with calculating an inflation rate equivalent to a 15% contingency on the non-transferrable costs.



The steps I have taken are as follows:

Analyze costs that we would expect to be transferred to can-do (excludes things like severence and staffing/monitoring that Can-Do can do at no extra cost) , including salvage recoveries

Calculate the present value of these costs using the stated 6% interest rate

Add 15% to this and that is my 'target'



I have then tried to calculate the 'equivalent inflation rate' by applying an inflation factor when discounting back using the 6% interest rate; however, what I am finding is this set-up makes it impossible to have an inflation rate equivalent to the 15% margin due to the fact that both the costs and the SAVINGS for each year are hit with the same factor. Perhaps including the salvage is where I am messing up?



My present value factor for each year is ((1+inflation)/(1+discountrate))^(year of cashflow - 2006), am I missing something?



I have not factored in the ~$1.5M per year that Can-Do expects to save as I thought the question is focused on the following:

Determine the inflation rate equivalent to a 15% contingency margin on non-transferrable costs assuming a 6% interest rate for discount purposes in both scenarios.



Thanks for the help getting me back on track!

EOM1 - Contingency equivalent Inflation problem