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When appraising projects in inflationary conditions, it is essential that 'nominal' cash flows are used with the nominal cost of capital, or that 'real' cash

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"When appraising projects in inflationary conditions, it is essential that 'nominal' cash flows are used with the nominal cost of capital, or that 'real' cash flows are used with the real cost of capital." Explain this statement and discuss the problems which high inflation rates can cause in investment appraisal and financial management

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