How Should Engineers Deal with the Fact That Inflation Rates

Multiple Choice

How should engineers deal with the fact that inflation rates are very difficult to predict?

A) Avoid any projects that involve cash flows occurring more than two years in the future.
B) Obtain estimates of inflation from expert economists.
C) Assume that inflation rates will average out to zero over the project life.
D) Base project analysis on the highest rates of inflation that have occurred in the last ten years.
E) Perform a sensitivity analysis on the profitability of the project for different inflation rates.