True or False: Inflation will not affect the capital expenses if it is set to 0%.

The statement that inflation will not affect capital expenses if it is set to 0% is true because, with an inflation rate of 0%, there are no increases in the costs associated with capital expenditures over time. When inflation is zero, it means that the purchasing power of money remains constant, and as a result, the costs to acquire, maintain, or improve physical assets such as buildings or machinery do not rise. This scenario implies that if expenses are planned or budgeted with no projected inflation, the projected costs and outflows for capital expenses remain stable and predictable.

In the context of capital expenses, which typically involve large sums of money over extended periods, the absence of inflation simplifies financial planning and forecasting. Companies can make decisions based on fixed costs without worrying about the impact of rising prices. Inflation generally leads to increased costs for materials, labor, and other aspects tied to capital expenditure. However, when inflation is effectively at 0%, this dynamic does not come into play, ensuring that capital expenses are unaffected.