Nominal interest rates and nominal cash flows are usually reflected the____________?
Correct answer: A. Inflation effects
- A. Inflation effects
- B. Opportunity effects
- C. Equity effects
- D. Debt effects
Explanation
Nominal interest rates and nominal cash flows include the effect of inflation, so they must be used consistently in project evaluation. Real rates and real cash flows exclude inflation.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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