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should we use the real rate or money rate for getting EAC if qusetion says to ignore inflation and t

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › should we use the real rate or money rate for getting EAC if qusetion says to ignore inflation and t

  • This topic has 1 reply, 2 voices, and was last updated 14 years ago by vedavyas.
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  • June 2, 2011 at 9:50 pm #48822
    mmuneebsaeed
    Member
    • Topics: 5
    • Replies: 11
    • ☆

    should we use the real rate or money rate for getting EAC if question says to ignore inflation and taxation

    for example i have this question named sassone plc
    in this question says
    “using Equivalent annual cost and considering machine purchase prices and maintainance cost determine which machine should be purchased by sassone plc Ignore taxation and inflation”

    when it comes to the answer we all know that if the cash flows are not inflated we use the real cost of capital to solve the question
    But in the solution of this question the examiner is using the nominal rate of cost of capital

    plz help me clear this part of the question
    here is the link to the question
    https://www.scribd.com/doc/55467253

    June 5, 2011 at 8:37 am #82780
    vedavyas
    Member
    • Topics: 44
    • Replies: 62
    • ☆☆

    I would really like to see the question and if possible help you as well, but the scan that you have taken is not clear, could you possibly get a better scanned copy ? I don’t remember seeing this question in any paper, or is it in the BPP Rev. Kit ?

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