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Dear sir,
Today I was trying to solve Kaplan study text Test your understanding question 1 of investment appraisal chapter. They have provided some inflation rates. They have stated one statement that “All cash flows are in real terms”. When I was checking the solution’ they have inflated all the flows at year T1. i.e., from T0 to T1 and then so on they have applied inflation rate. I am confused whether it is a mistake because I think it should have been inflated from T1 to T2 and then so on i.e., the starting point should be T1 not T0 because there is no any statement that (at current prices).
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