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Sir,
What is the easy to calculate the op flow when there have general inflation for selling price, variable cost, fixed cost ?If all the flows inflate at the same general rate of inflation then you can just inflate the net cash flow and then discount at the actual (nominal) cost of capital. Or alternatively, you can ignore the inflation and discount the current price flows at the real cost of capital (having used the Fisher formula to ‘remove’ the inflation from the actual cost of capital.
However usually in the exam they inflate at different rates and you have then no choice but to inflate each separately.
All of the above is explained in the free lectures.
Thank you so much dear Moffat, it’s so nice of yours to give back to us always. U r the legend …..:)
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