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Dear Mr Moffat,
Seek your kind adviseIf question states 4 different rates, which one to be considered for discounting
1. Entity’s Current Real WACC
2. Nominal WACC
3.Risk adjusted value in Real term
4. Risk adjusted value in Nominal termShould I select point 4
Thanks and have a great evening
I cannot imagine why you are asking me this, because an exam question will not give you four rates like this!
As to which rate to use, it is most likely to be 4 (but you would not be given the rate – you would have to calculate it), but it depends on how the cash flows are given and as to whether you are required to calculate the NPV or the APV.
Than you so much Mr Moffat but I came across one of such mock questions recently. As I have not seen such in any of ACCA’s past questions.
Have a great day!
Sudipto
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