If the Discount Rate Is Stated in Nominal Terms, Then

question 21

Multiple Choice

If the discount rate is stated in nominal terms, then in order to calculate the NPV in a consistent manner, the project requires that

• A)cash flows be estimated in nominal terms.
• B)cash flows be estimated in real terms.
• C)accounting income be used.
• D)cash flows be estimated ignoring inflation.

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Definitions:

Consignee

The individual or entity to whom goods are shipped and who is responsible for receiving the shipment and completing any customs paperwork.

Ending Inventory

The value of goods that remain unsold at the end of an accounting period.

Cost Flow Assumption

An accounting method used to value inventory and determine the cost of goods sold, such as FIFO (First In, First Out) or LIFO (Last In, First Out).

LIFO

"Last In, First Out" method of inventory valuation where the most recently produced items are recorded as sold first.