Proper Treatment of Inflation in NPV Calculations Involves

question 39

Multiple Choice

Proper treatment of inflation in NPV calculations involves:
I.discounting nominal cash flows by the nominal discount rate;
II.discounting real cash flows by the real discount rate;
III.discounting nominal cash flows by the real discount rate

• A)I only
• B)II only
• C)III only
• D)I and II only

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Definitions:

Bushels

A measure of volume that is used for quantities of grain, fruit, or other produce.

Variable Input

Variable input refers to a production factor that can be adjusted in the short term to increase or decrease production output.

Short Run

A period during which at least one of a firm's inputs is fixed, limiting its capacity to adjust fully to changes in market demand.

Short Run

A time period in economics during which at least one factor of production is considered fixed, limiting the ability of the economy or firm to adjust to changes.