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a project consist of a series of cash outflows in the first few years followed by a series of positive cash inflows.the total cash inflows exceeds the total cash outflows.the project was originally evaluated assuming a zero rate of inflation.
if the project is reevaluated on the assumption that the cash flows were subject to a positive rate of inflation,what would be the effect on the payback period and the internal rate of return please answer and explainIf the cash flows were subject to inflation, then they would be higher.
Higher cash flows will mean you get the cash back sooner and therefore the payback period will be shorter.
Higher cash flows will make the NPV higher and therefore the IRR will be higher.
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