Ms. Holub is concerned because the accountant may have ignored ination in his analysis. While the first year costs are correct, Anna believes the accountant has simply forgotten about the effects of inflation on the project cash flows after the first year. Anna's expectation is that total labor costs including benefits will increase annually at the rate of ination of 3 percent per year, starting in the fourth year of the project (with no ination effect in years 1-3). Anna expects that raw material costs will increase with inflation (at 3%) in every year of the project. She also expects the unit cost of purchased pipe (at 45 cents in the first year)