Consider the following scenario: Extensive Enterprise Inc. is considering opening a new division to produce units that it expects to sell at a price of $15,700 each in the first year of the project. The company expects the cost of producing each unit to be $7,100 in the first year; however, it expects the selling price and cost per unit to increase by 1% each year, BB 2 Based on the preceding information, the company expects the selling price in the fourth year of the project to be cost per unit in the fourth year of the project to be and it expects the $15,857 Which of the following statements about inflation's effect on net present value (NPV) is correct? $16,337 When the selling price and cost per unit are expected to increase at the same rate, forgetting to take 1516,176account in a capital budgeting analysis will typically cause the estimated NPV to be lower than the true NPV. $16,016 e When the selling price and cost per unit are expected to increase at the same rate, you do not need to take inflation into account when performing a capital budgeting analysis. Extensive Enterprise Inc. is considering opening a new division to produce units that it expects to sell at a price of $15,700 each in the first year of the project. The company expects the cost of producing each unit to be $7,100 in the first year; however, it expects the selling price and cost per unit to increase by 1% each year. Based on the preceding information, the company expects the selling price in the fourth year of the project to be cost per unit in the fourth year of the project to be and it expects the Which of the following statements about inflation's $7,315 het present value (NPV) is correct? $7,388 When the selling price and cost per unit ed to increase at the same rate, forgetting to take inflation into account in a capital budgeting analysis will typically cause th $7,171 NPV to be lower than the true NPV. When the selling price and cost per unit$7,243 Jed to increase at the same rate, you do not need to take inflation into account when performing a capital budgeting analysis. Extensive Enterprise Inc. is considering opening a new division to produce units that it expects to sell at a price of $15,700 each in the first year of the project. The company expects the cost of producing each unit to be $7,100 in the first year; however, it expects the selling price and cost per unit to increase by 1% each year. Based on the preceding information, the company expects the selling price in the fourth year of the project to be cost per unit in the fourth year of the project to be and it expects the Which of the following statements about Inflation's effect on net present value (NPV) is correct? When the selling price and cost per unit are expected to increase at the same rate, forgetting to take inflation into account in a capital budgeting analysis will typically cause the estimated NPV to be lower than the true NPV. When the selling price and cost per unit are expected to increase at the same rate, you do not need to take inflation into account when performing a capital budgeting analysis
