How Should Engineers Deal with the Fact That Inflation Rates

question 46

Multiple Choice

How should engineers deal with the fact that inflation rates are very difficult to predict?

• A)Avoid any projects that involve cash flows occurring more than two years in the future.
• B)Obtain estimates of inflation from expert economists.
• C)Assume that inflation rates will average out to zero over the project life.
• D)Base project analysis on the highest rates of inflation that have occurred in the last ten years.
• E)Perform a sensitivity analysis on the profitability of the project for different inflation rates.

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Definitions:

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