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Suppose a young financial analyst at the firm you work for decides to use a real cost of capital to discount the firm's proposed capital
Suppose a young financial analyst at the firm you work for decides to use a real cost of capital to discount the firm's proposed capital budgeting projects without adjusting any of the projects' forecasted cash flow for the effects of inflation. Based on what you have learned in class, briefly explain whether this would cause the firm to accept too many projects than is optimal or reject too many projects than is optimal. Suppose a young financial analyst at the firm you work for decides to use a real cost of capital to discount the firm's proposed capital budgeting projects without adjusting any of the projects' forecasted cash flow for the effects of inflation. Based on what you have learned in class, briefly explain whether this would cause the firm to accept too many projects than is optimal or reject too many projects than is optimal
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