Inflation does not need to be built into expected cash flows; the discount rate used in net present value calculations captures the effect of inflation.If you were to include expected inflation into cash flows, all net present value calculations would be incorrect.

Question

Quizplus · Accepted Answer

Inflation should be considered when estimating expected cash flows for net present value calculations. Ignoring inflation can lead to inaccurate discount rates and incorrect NPV calculations.

Inflation Does Not Need to Be Built into Expected Cash