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Q69: Lignum
The development costs considered here are including the inflation and the costs are also discounted using the Nominal Rate of return, whereas in the option bit we specifically caluclate the required rate of return. Why aren’t we considering inflation in both these aspects.
Please give the exam date when you ask about a question (e.g. June 2010), because ‘Q69’ means absolutely nothing to me – I have no idea which publishers book you are using (or which edition of it).
The only question I can find called Lignum was asked in the December 2012 exam, but is about foreign currency hedging and has no mention of development costs or inflation or anything you have written.
(If it is December 2012, then the publisher of your book must have added things for some reason and I cannot help because I don’t have it – I only have the original actual exam question.)
Extremely Sorry, I’m referencing the revision kit by BPP and it’s amended. Not sure if you have the BPP revision kit and it’s okay if you don’t, thanks anyway.
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