Assume That Sales Revenues Are Increasing More Rapidly Than Product

question 58

Multiple Choice

Assume that sales revenues are increasing more rapidly than product costs,but that a project's cash flows have been represented as an annuity when calculating NPV.Which of the following problems may occur?

• 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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Definitions:

Condensed Structural Formula

A condensed structural formula is a method of describing the elements or molecules that compose a compound and their arrangement in a compact form without drawing full structural diagrams.

Dimethylbutane

An organic compound with the formula C6H14, a type of alkane that is used as a fuel.

Dimethylpentane

An isomer of hexane, used as a reference fuel in octane rating and found in various petroleum distillates.

Ethylbutane

A chemical compound that is a structural isomer of octane, with the formula C6H14.