Greenspan Inc. discounts cash flows at a nominal rate of 10%. Inflation over the next few years is expected to average 3%. Which of the following would be a correct adjustment for inflation when computing net present value?
A) Discount cash flows at 10%; increase revenues and expenses by 3% each year.
B) Discount cash flows at 13%; increase revenues and expenses by 3% each year.
C) Discount cash flows at 7%; ignore inflation when forecasting revenues and expenses.
D) Either A or C would be acceptable.
Answer: D
You might also like to view...
The major problem with the sales–productivity ratio method of assigning space is that _____
a. storability may not be considered b. too much space may be assigned for merchandise space c. too little space may be assigned for merchandise space d. an inadequate selection of merchandise may be stocked
________ states that the value of a network is equal to the square of the number of users connected to it
A) Kryder's Law B) Metcalfe's Law C) Moore's Law D) Nielsen's Law