Mr. Art Deco will be paid $100,000 one year hence. This is a nominal flow, which he
Question:
Mr. Art Deco will be paid $100,000 one year hence. This is a nominal flow, which he discounts at an 8% nominal discount rate:
PV = 100,000/1.08 = 5 $92,593
The inflation rate is 4%.
Calculate the PV of Mr. Deco’s payment using the equivalent real cash flow and real discount rate. (You should get exactly the same answer as he did.)
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Related Book For 
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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