When adjusting for inflation, there are two methods. The real- rate method where the discount rate is adjusted for inflation and the nominal approach, where real cash flows are adjusted to nominal cash flows. What is the primary drawback of the real-rate approach? a. It is more cumbersome to calculate. b. Depreciation deductions are adjusted for inflation. c. There are no drawbacks.

When adjusting for inflation, there are two methods. The real- rate method where the discount rate is adjusted for inflation and the nominal approach, where real cash flows are adjusted to nominal cash flows. What is the primary drawback of the real-rate approach? a. It is more cumbersome to calculate. b. Depreciation deductions are adjusted for inflation. c. There are no drawbacks.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 15MC: The IRR method assumes that cash flows are reinvested at _________. A. the internal rate of return...

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The IRR method assumes that cash flows are reinvested at _________. A. the internal rate of return B. the companys discount rate C. the lower of the companys discount rate or Internal rate of return D. an average of the internal rate of return and the discount rate
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