A cash flow received in two years is expected to be $10,816 in nominal terms. If the real rate of interest is 2% and the inflation rate is 4%, what is the real cash flow for year 2? A $ 11,236 B $ 10,816 C. $10,000 D. $9,246

A cash flow received in two years is expected to be $10,816 in nominal terms. If the real rate of interest is 2% and the inflation rate is 4%, what is the real cash flow for year 2? A $ 11,236 B $ 10,816 C. $10,000 D. $9,246

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 23E: Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A cash flow received in two years is expected to be $10,816 in nominal terms. If the
real rate of interest is 2% and the inflation rate is 4%, what is the real cash flow for year
2?
A $ 11,236
B $ 10,816
C. $10,000
D. $9,246

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