The tax savings cash flows are treated differently under the nominal and real methods. Which of the following reflects this treatment? $\begin{array}{llcc}
\quad\quad\underline{\text {Real}}&\quad\underline{\text {Nominal}}
\end{array}$

a.$\begin{array}{llcc}
\text { Inflated}& \text { Deflated }
\end{array}$

b.$\begin{array}{llcc}
\text { Deflated}& \text { Used as is }
\end{array}$

c.$\begin{array}{llcc}
\text { Used as is }&\text { Deflated}
\end{array}$

d.$\begin{array}{llcc}
\text { Deflated}&\text { Inflated}
\end{array}$

Question

The tax savings cash flows are treated differently under the nominal and real methods. Which of the following reflects this treatment? $\begin{array}{llcc}
\quad\quad\underline{\text {Real}}&\quad\underline{\text {Nominal}}
\end{array}$

a.$\begin{array}{llcc}
\text { Inflated}& \text { Deflated }
\end{array}$

b.$\begin{array}{llcc}
\text { Deflated}& \text { Used as is }
\end{array}$

c.$\begin{array}{llcc}
 \text { Used as is }&\text { Deflated}
\end{array}$

d.$\begin{array}{llcc}
\text { Deflated}&\text { Inflated} 
\end{array}$

Quizplus · Accepted Answer

Under the real method, tax savings cash flows are deflated to account for inflation, while under the nominal method, they are used as is without adjustments for inflation.

The Tax Savings Cash Flows Are Treated Differently Under the Nominal