Tia
04-12-07, 03:39 AM
Real and nominal interest rates
(1 + Nominal or money rate) = (1 + real rate) (1 + inflation rate)
Calculate NPV = Use after-tax cost of capital as discount rate
After-tax rate = Before-tax rate x (1 – tax rate)
Usually applied to before-tax cash flows
(1 + Nominal or money rate) = (1 + real rate) (1 + inflation rate)
Calculate NPV = Use after-tax cost of capital as discount rate
After-tax rate = Before-tax rate x (1 – tax rate)
Usually applied to before-tax cash flows