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Hi sir,
I am really confused on when to use money rate and real rate .
Can you help me please.Usually, when there is inflation we take the nominal cash flows (i.e. the actual cash flows after inflating them) and discount at the nominal WACC (i.e. the actual WACC, or money rate).
Alternatively, but only if the question requires it, we take the current price cash flows (i.e. ignoring inflation) and discount at the real WACC (i.e. the cost of capital if no inflation).
All of this is explained, with examples, in my free lectures on investment appraisal with inflation.
The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
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