Why Is It Fairly Easy to Fall into the Trap

question 107

Multiple Choice

Why is it fairly easy to fall into the trap of discounting real cash flows with nominal rates?

• A)it is difficult to determine real discount rates.
• B)increases in nominal cash flows are often not forecast.
• C)inflation does not impact cash flows, but it does impact discount rates.
• D)increases in revenues are offset by increases in costs.

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Definitions:

Major Parts

Primary or most important components or sections of an object, system, or concept.

Organisation

An entity comprising multiple people, such as a company or business, that has a particular purpose and structured system for achieving its goals.

Cost Containment

Strategies and actions taken by an organization to control or reduce its expenses without compromising the quality of its products or services.

Production Targets

Specific goals set for the amount of products to be produced within a certain timeframe.