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In past paper of F9, question Rupab co (DEC 08)
It is required to calculate the cash flows of the project . In given answer , the existing company’ WACC is used as nominal discount rate of this investment project.
Question : In this case , the existing WACC of company = nominal discount rate , because I thought the existing WACC is real discount rate .- Topics: 0
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Is your question about inflation?
When dealing with inflation and the discount factor, remember that you only adjust the discount factor if Revenue and Costs have separate inflation rates, and the question also gives you ‘general inflation rate’ as well.
If the question only gives ‘general inflation’ you can ignore it: compounding costs, revenue and the discount factor by the same number gives you the identical result as if you’d ignored it.
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