When Cash Flows Are Stated in Real Dollars and Discounted

question 94

Multiple Choice

When cash flows are stated in real dollars and discounted using the a nominal rate,

• A) this understates the Present Value of the future cash flows.
• B) this overstates the Present Value of the future cash flows.
• C) this neither understates nor overstates the Present Value of the future cash flows.
• D) this increases the payback period and increases the RRR.
• E) this is a normal adjustment made to account for risky projects.

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Definitions:

Rehearsal

The act of practicing a performance or activity repeatedly in preparation for a public presentation.

Elaboration

Elaboration is the process of adding more information or detail to a memory, concept, or idea, making it more complex and enriched.

Clustering

The grouping of similar objects or data points in a way that they are more closely associated with each other than with those in other groups.

Sensory Memory

The shortest-term element of memory that acts as a buffer for stimuli received through the five senses, which are retained accurately but very briefly.