The Most Frequently Encountered Error When Accounting for Inflation in Capital

question 5

Multiple Choice

The most frequently encountered error when accounting for inflation in capital budgeting is

• A) determining the amount of net cash flows after taxes.
• B) determining the nominal discount rate.
• C) keeping net cash flows in real terms and using a nominal discount rate.
• D) keeping net cash flows in nominal terms and using a real discount rate.
• E) increasing the nominal rate by the inflation rate.

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Definitions:

Six-Digit Coding

A reference to standardized codes, such as those in classification systems, that use six digits to categorize detailed information.

Industry Subsector

A specific, defined part of a broader industry, characterized by a unique set of products, services, or manufacturing processes.

NAICS

The North American Industry Classification System is a norm employed by Federal statistical bodies to categorize business entities.

Triclosan

An antimicrobial and antifungal agent found in some consumer products, including toothpaste and hand sanitizer, which has raised health and environmental concerns.