Why Is It Fairly Easy to Fall into the Trap

question 116

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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