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In an inflationary environment which is the correct way of calculating net present value (NPV)?

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In an inflationary environment which is the correct way of calculating net present value (NPV)?

A.

Using nominal cash flows and a nominal discount rate.

B.

Forecasting the cash flows including the effect of inflation and then using a real discount rate.

C.

Using real cash flows and a nominal discount rate.

D.

Forecasting the cash flows excluding the effect of inflation and then using a nominal discount rate.

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