Which of the Following Statements Presents the Correct Treatment of Inflation

question 43

Multiple Choice

Which of the following statements presents the correct treatment of inflation in project evaluation?

• A)Estimating cash flows based on constant prices and discounting them by the nominal cost of capital.
• B)Estimating cash flows without adjustment for anticipated price changes and discounting them by the real cost of capital.
• C)Estimating cash flows based on anticipated price changes and discounting them by the real cost of capital.
• D)All of the given options.

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Definitions:

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Étienne Chevalier

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