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Hi John,
To check if my understanding is correct when using the correct DF for NPV questions, I believe:
When general inflation and real cost of capital are given in the questions then do: (1+R)(1+I) for getting the DF.
If the question provides the nominal (money terms) after tax cost of capital then always use this as the DF?
Thanks
Usually, yes, we use the nominal cost of capital to discount the nominal (actual) cash flows.
The only time to do different is if the question tells you to discount the current price flows at the real cost of capital.
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