Susan is evaluating an engineering project. She assumes zero inflation for the duration of the project. With respect to this situation, which statement is consistent with the subject matter of engineering economics?
A)A zero inflation assumption is always a good one.
B)A zero inflation assumption is not realistic but it is better than assuming some uncertain inflation rate.
C)A zero assumption is not a bad one for the base case, but then the project should be evaluated under different values in some range to see how inflation affects the project.
D)Since in Canada inflation is low, it is possible to neglect it.
E)The highest historical inflation rate must be chosen instead.

Question

Quizplus · Accepted Answer

A zero inflation assumption can serve as a useful baseline for analysis, but it's important to test how different inflation rates might impact the project to understand its sensitivity to inflationary changes. This approach allows for a more comprehensive evaluation of the project's viability under various economic conditions.

Susan Is Evaluating an Engineering Project