An approach that allows analysis of different future rates of inflation or deflation for different cash flows is the:
A) NPV analysis
B) Payback method
C) Accrual Accounting Rate of Return
D) Target costing method

Question

Quizplus · Accepted Answer

NPV analysis considers the time value of money and factors in the expected future rates of inflation or deflation to determine the present value of cash flows. This approach allows for a more accurate evaluation of the potential profitability or value of an investment project. The Payback method, Accrual Accounting Rate of Return, and Target costing method do not take into account future rates of inflation or deflation in their analyses.

An Approach That Allows Analysis of Different Future Rates of Inflation