Assume That a Project's Sales Revenues Are Expected to Increase

Multiple Choice

Assume that a project's sales revenues are expected to increase more rapidly than product costs, but the project's cash flows have been represented as a fixed annuity when calculating NPV. Which one of the following problems might exist within this analysis?

A) Nominal cash flows are possibly being discounted with a real rate.
B) Real cash flows are possibly being discounted with a nominal rate.
C) Nominal cash flows are possibly being discounted with a nominal rate.
D) Real cash flows are possibly being discounted with a real rate.