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The net cash flow from the purchase of an asset for $1,000 is expected to be responsive to inflation. The inflation rate is forecast to
The net cash flow from the purchase of an asset for $1,000 is expected to be responsive to inflation. The inflation rate is forecast to be 5% for the next 3 years. Based on this forecast, the expected cash flow in actual dollars is shown below: a) What is the combined interest-inflation rate if the organization expects a 10% return on investments? b) Using this interest rate, calculate the present worth. Is this present worth in constant or actual dollars? c) What cash flow estimates in constant dollars would produce the same present worth when discounted at 10% ? d) Do you feel it is a better practice to estimate future cash flow in "constant" dollars or in "actual" dollars? Why
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