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11: Assignment - Cash Flow Estimation and Risk Analysis 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 impact of inflation in determining the value of the cash flows of the project can result in erroneous estimations. Consider the following scenario: Praxis Corp. is considering opening a new division to make iWidgets that it expects to sell at a price of \\( \\$ 14,950 \\) each in the first year of the project. The company expects the cost of producing each iWidget to be \\( \\$ 7,100 \\) in the first year; however, it expects the selling price and cost per iwidget to increase by \3 each year. If a company does not take inflation into account when analyzing a project, the expected net present value (NPV) of the project will typically be than the true NPV of the project. 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 impact of inflation in determining the value of the cash flows of the project can result in erroneous estimations. Consider the following scenario: Praxis Corp. is considering opening a new division to make iWidgets that it expects to sell at a price of \\( \\$ 14,950 \\) each in the first year of the project. The company expects the cost of producing each iWidget to be \\( \\$ 7,100 \\) in the first year; however, it expects the selling price and cost per iWidget to increase by \3 each year. Based on this information, select the correct answer: Selling price in year 4 : unit in year 4: iny does not take inflation into account when analyzing a project, the expected net present value (NPV) of the project will typically be than the true NPV of the project