Assume that sales revenues are increasing more rapidly than product costs, but that a project's cash flows have been represented as an annuity when calculating NPV. Which of the following problems may occur?
A) nominal cash flows are possibly being discounted with a real rate.
B) nominal cash flows are possibly being discounted with a nominal rate.
C) real cash flows are possibly being discounted with a real rate.
D) real cash flows are possibly being discounted with a nominal rate.
Answer: D) real cash flows are possibly being discounted with a nominal rate.
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