Praxis Corp. is considering opening a new division to make iToys that it expects to sell at a price of $12,990 each in the first year of the project. The company expects the cost of producing each iToy to be $5,500 in the first year; however, it expects the selling price and cost per iToy to increase by 2% each year.

 

Based on this information, complete the following table: Selling price in year 4: Cost per unit in year 4: 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.