- This topic has 7 replies, 4 voices, and was last updated 7 years ago by
.
Viewing 8 posts - 1 through 8 (of 8 total)
- Posts
Real cost of capital 8%. Inflation 5%. Can you pls explain how to get nominal rate of 13.4%?.thks
You should use fishers equation , known as (1+nominal rate)=(1+ real rate)x(1+inflation rate)
In this case just put in the numbers (1+ i)=(1+0.08)(1+0.05) you should be able to get i =0.134 which is 13.4%Thanks a lot kenzo. But how can I calculate the real cost of capital of a firm without a given inflation rate?
An illustration is given below.
A labour saving machine cost #60000 and will sell #24000 per annum at current wage rate. The machine expected a 3years life with no scrap value. The firms cost of capital is 10%, calculate the project npv with no inflation.. Thanks.
Viewing 8 posts - 1 through 8 (of 8 total)
- The topic ‘calculate nominal from real cost of capital’ is closed to new replies.