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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 inilation 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 inilation in determining the value of the cash fiows of the nrwject can result in erroneous estimations. Consider the following scenario: Extensive Linterprise Inc. is considering opening a new division to make iWidocts that it expects to self at a price of $12,990 each in the firit year of the project. The company expects the cost of producing each iwidget to be 36,200 in the first year; howeyer, it expects thet selling price and cost per Widget to increase by 4% each year. Based on this information, complete the following table: Extensive Enterprise Inc. is considering opening a new division to make iWidgets that it expects to sell at a price of $12,990 each in the first year of the project. The company expects the cost of producing each iWidpet to be $6,200 in the first year; however, it expects the selling price and cost per iWidget to increase by 4% each year. Based on this information, complete the following table: If a company does not take inflation into account when analyzing a project, the expected net present value (NPV) of the project will typically be than the true NPV of the project

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