When computing the NPV of a project, it is important to consistently use either nominal dollars and nominal rates or real dollars and real rates.

Question

Quizplus · Accepted Answer

NPV calculations require consistency between the dollar values and interest rates used. If nominal values are used for one and real values are used for the other, the resulting NPV will be distorted and inaccurate. It is important to use either all nominal values or all real values in the calculation.

When Computing the NPV of a Project, It Is Important