Assume That a Project's Sales Revenues Are Expected to Increase

question 69

Multiple Choice

Assume that a project's sales revenues are expected to increase more rapidly than product costs, but the project's cash flows have been represented as a fixed annuity when calculating NPV. Which one of the following problems might exist within this analysis?

• A) Nominal cash flows are possibly being discounted with a real rate.
• B) Real cash flows are possibly being discounted with a nominal rate.
• C) Nominal cash flows are possibly being discounted with a nominal rate.
• D)Real cash flows are possibly being discounted with a real rate.

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