If the Inflation Rate Was Positive the Expected NPV of an Investment

question 44

Multiple Choice

If the inflation rate was positive the expected NPV of an investment would be:

• A) understated if real cash flows were discounted by the nominal discount rate.
• B) understated if nominal cash flows were discounted by the nominal discount rate.
• C) overstated if the real cash flows were discounted by the nominal discount rate.
• D) understated if the nominal cash flows were discounted by the real discount rate.
• E) overstated if the real cash flows are discounted by the real discount rate.

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Definitions:

Positioning Strategies

Techniques used by businesses to place their products or services in the market so that they stand out to potential customers.

Competitive Advantage

An advantage that a company has over its competitors, allowing it to generate greater sales or margins and/or attract & retain more customers.

Firm

A business organization, such as a corporation, partnership, or sole proprietorship.

Market Segmentation

The strategy of dividing a broad target market into subsets of consumers with common needs, preferences, or characteristics, to then target them more effectively.