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It is often easy to overlook the impact of inflation on the net present value of the project. Not incorporating the impact of infiation in

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It is often easy to overlook the impact of inflation on the net present value of the project. Not incorporating the impact of infiation in determining the value of the cash fiows of the project can result in erroneous estimations. Consider the following scenario: Globex Corp. Is considering opening a new division to make iGadgets that it expects to sell at a price of 514,950 each in the first year of the project, The company expects the cost of producing each iGadget to be 57,225 in the first vear; however, it expects the selling orice. and cost per isadget to 5 siling price in year a: cost per unit in vas 4 ; If a company does not take inflation into account whan analvaing a jroject, the oxpected net present value (fipy) of the prolect with tybleally be thian the true Npy of the brolect It is often easy to overlook the impact of inflation on the net present value of the project. Not incorporating the impact of inflation in determining the value of the cash flows of the project can result in erroneous estimations. Consider the following scenario: Globex Corp. is considering opening a new division to make iGadgets that it expects to sell at a price of $14,950 each in the first year of the project. The company expects the cost of producing each iGadget to be $7,225 in the first year; however, it expects the selling price and cost per iGadget to increase by 3% each year. If a cumpany does not take inflation into account when analvalno a project, the expected net oresent value (NPV) of the project will typicaliy be than the true NFV of the project Globex Corp. is considering opening a new division to make iGadgets that it expects to sell at a price of $14,950 each in the first year the project. The company expects the cost of producing each iGadget to be 57,225 in the first year; however, it expects the selling pr? and cost per iGadget to increase by 3% each year. Based on this information, select the correct answer; Sellinin incice in year 4 : unit in year 4: iny does not take inflation into account when analyzing a projec, the emected net present value (Np) of the project will typically by than the true NiFV of the prolect

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