Proper Treatment of Inflation in NPV Calculations Involves

question 54

Multiple Choice

Proper treatment of inflation in NPV calculations involves

• A)discounting nominal cash flows by the nominal discount rate.
• B)discounting real cash flows by the real discount rate.
• C)discounting nominal cash flows by the real discount rate.
• D)discounting nominal cash flows by the nominal discount rate and discounting real cash flows by the real discount rate.

---

Definitions:

Direct Materials

Raw materials that can be directly attributed to the production of finished goods.

Finished Units

Products that have completed the manufacturing process and are ready for sale or distribution to customers.

Direct Labor

The wages paid to workers directly involved in the production of goods or services.

Overhead

All ongoing business expenses not directly attributable to creating a product or service.