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– i assume all p4 questions, especially in calculation of npv have inflated each items (eg sales , cost) in specific inflation rates. therefore we have used monetary inflation rate incorporated into WACC ??am i correct ?
– then is there any questions that have used real inflation rate to discount the cashflows ? Because so far i ve only seen wacc to discount to the cashflows.
Why are you not watching the lectures? You cannot expect me to keep typing out here what is already in the lectures 🙂
There is no such thing as the ‘real inflation rate’!!
The only time it is likely that we will the real cost of capital when it is a perpetuity (because it is impossible to list the nominal cash flows for a perpetuity), albeit we usually used the dividend valuation formula in order to achieve this. This occurs in plenty of past exam questions.
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