CFA CFA General Capital budgeting

Capital budgeting

  • This topic has 0 replies, 1 voice, and was last updated Apr-20 by Answer.
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      Guys I have a problem that is playing a little tricks with me, on capital budgeting

      When they say ” All our projects are evaluated to take inflation and risk into account. For inflation, we adjust by using nominal cashflows(we adjust any real cashflows using the inflation rate)”   

                   And then comoany wacc is 15%, risk free rate is 8%, inflation rate is 6%, and the market risk premium is 6%,excess funds can be re-invested at 12% and the company is established and has a beta of 0.9 which it also uses in evaluating core projects.

      How do I go about it in terms of adjusting for inflation?

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