Cash Flow Estimation and Risk Analysis Graded Assignment | Due Sunday 10.08.17 at 11:45 PM Attempts: 3. Inflation in project analysis It is often easy to overlook the impact of inflation on the net present value of the project. Not incorporating the Do No Harm: /3 impact of inflation in determining the value of the cash flows of the project can result in erroneous estirmations. Consider the following scenario: Widget Corp. is considering in the first year of the project. The company expects the cost of producing each unit to be $6,700 in the first year however, it expects the selling price and cost per unit to increase by 3% each year. Based on the preceding information, the company expects the selling price in the fourth year of the project to be ,and it expects the cost per unit in the fourth year or the project to be _- Which of the following statements about inflation's effect on net present value (NPV) is correct? O When the selling price and cost per unit are expected to increase at the same rate, forgetting to take infilation into account in a capital budgeting analysis will typically cause the estimated NPV to be lower than the true NPV. O When the selling price and cost per unit are expected to increase at the same rate, you do not need to take inflation into account when performing a capital budgeting analysis. Al ghts Continue without saving