(Appendix 12A)The nominal method is preferred to the real method for NPV analysis because:
I. Cash flows can be inflated at different rates
II. It includes a risk premium
III. It includes the risk-free rate

Question

Quizplus · Accepted Answer

The nominal method is preferred to the real method for NPV analysis because it allows for cash flows to be inflated at different rates, which is not possible with the real method. The inclusion of a risk premium and the risk-free rate are not specific advantages of the nominal method over the real method.

(Appendix 12A)The Nominal Method Is Preferred to the Real Method