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Dear sir, please help me to explain about the question 160 of revision kit. Part A require to calculate nominal NPV and real NPV.And I understand that 2 value will be different.But the answer shows it has the same value.I understand that the answer show 2 approach to calculate nominal NPV, and not address the requirements.Do you think so?
The answer does not show two approaches to calculating the nominal NPV.
The first part of the answer calculates the nominal/actual cash flows and discounts at the nominal/actual cost of capital.
(And after are the workings for getting the nominal cash flows).
The second part of the answer calculates the real cash flows, by taking the nominal flows and removing the general rate of inflation of 3.7%. It then discounts the real cash flows at the real cost of capital of 8%.
how is it calculated,,like a question which has sales, selling price, variable cost, fixed costs and inflation. can u explain in detail involving an example will be much appreciated
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