Hello SIR.
While answering the NPV question in the exam, I was not given a discount factor for the question but I had given general inflation of 5% while the real return [I forget the %] was also given. Could you please tell me how to calculate the discount factor from such information?
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Let me know this!
5y ago#1I do explain this in my free lectures!!!
To get the actual/nominal cost of capital you use the Fisher formula that is provided on the formal sheet.
1+ i = (1 + r) (1 + h) where i is the nominal cost of capital, r is the real cost of capital, and h is the rate of inflation.
You then get the discount factor from the tables for that discount rate.
Okay! But to get the discount factor, the question has to state the real cost of capital with the rate of inflation [question mentioned general & specific inflation, which one to choose?]
Please correct me that real cost of capital is the return that investors want & the difference between general & specific inflation is that specific inflation is related to different variables but general inflation is I don't know [so please mention that]?
5y ago#3It is the general rate of inflation that we use.
Have you watched the free lectures?
I am also looking for that lecture. Please send me the link SIR
5y ago#5The lectures are meant to be watched in order rather than at random.
There is an index of all of the lectures linked from the main Paper FM page.
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