An investment is forecasted to last 3 years. The nominal net cashflows are expected to be 1000$
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Question:
An investment is forecasted to last 3 years. The nominal net cashflows are expected to be 1000$ for each one of the years 1 to 3. Based on the inflation rate and the above cashflows, the real net cash flows for the years 1 to 3 are 909,091$, 826,446$ and 751,315$ respectively. The nominal and real discount rate is 21% and 10% respectively. Assuming that you use NPV for assessing the investment:
Calculate the derived NPV by discounting the nominal net cashflows with the nominal and the real discount rate. How is your decision impacted regarding the investment when nominal net cash flows are used and the real discount rate?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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