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Sir can u explain me the concept related to nominal and real rates and how do we use these in a question?
thanks alotUsually we discount the nominal (actual) cash flows after inflating them at the nominal (actual) WACC.
The alternative (but only if asked for in the question) is to discount the real cash flows (the flows at current prices ignoring inflation) at the real (or effective) WACC, which is calculating using the Fisher formula on the formula sheet.This is explain in the free lecture on investment appraisal with inflation.
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