Because future inflation has no effect on the current purchase price of an asset, inflation factors can be ignored when capital-budgeting decisions are made.

Question

Quizplus · Accepted Answer

Inflation factors should not be ignored in capital-budgeting decisions because future inflation can affect the cash flows associated with the asset over its lifetime, which should be taken into account when evaluating the investment's profitability. Ignoring inflation can lead to inaccurate decision-making and potentially result in unexpected losses.

Because Future Inflation Has No Effect on the Current Purchase