Inflation Does Not Need to Be Built into Expected Cash

question 39

True/False

Inflation does not need to be built into expected cash flows; the discount rate used in net present value calculations captures the effect of inflation.If you were to include expected inflation into cash flows, all net present value calculations would be incorrect.

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Definitions:

Classifications of Corporations

Classifications of corporations involve categorizing companies based on their ownership structure, purpose, or tax status, such as public, private, nonprofit, or multinational corporations.

Descriptive Statements

Statements that describe or explain information, phenomena, or findings without offering opinions or arguments.

Contributed Capital

The total value of the cash and other assets given by shareholders in exchange for shares of the company's stock.

Bonds Payable

Long-term debt instruments issued by a company to borrow funds, where the company agrees to pay back the principal along with interest on specified dates.