Why is it NOT necessary to adjust the required return for expected inflation when evaluating capital investments in an inflationary environment? Explain

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Why is it NOT necessary to adjust the required return for expected inflation when evaluating capital investments in an inflationary environment? Explain



Answered Same DayDec 25, 2021

Answer To: Why is it NOT necessary to adjust the required return for expected inflation when evaluating capital...

David answered on Dec 25 2021
129 Votes
With regards to capital budgeting decisions, it is not essential to adjust the required return for

inflation as the underlying discount rate used for evaluation of the project takes into
consideration the nominal interest rates which tend to reflect the impact of inflation. Also, in
an...
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