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Determine the real rate adjusted NPV

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Question - Company Z expects inflation to be 10% over the next five years. The company is evaluating a project with real operating (before tax) cash flows of R10 000 per annum and an initial cost of R50 000. From year 1 to year 5, tax shields (depreciation allowances) of R2 000 will be taken. The company's WACC is 15% and a tax rate of 20% applies. Determine the real rate adjusted NPV and then adjust the cash flows to nominal values to determine the inflation adjusted NPV of the project.

Reference no: EM133099551

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