Is it even worth trying to learn this section? Short reading but what a nightmare! Anyone know if this has been on the exam in prior years?
I gave up on that too. Now we have 2 of us in the club. Anyone else wanna join?
I have a feeling if you know why adjusting CFs to incorporate risk is better than adjusting the discount rate you should be ok. I say this and then watch us get an item set that asks you to calculate each step of the CF adjustments
all I remember is calculate nominal stuff with nominal rate and real stuff with real rate. Nominal = (1+Real) X (1+Inflation)
^ That pretty much sums up my entire L2 preparation
I would also remember that NWC and taxes are calculated on a nominal basis and then converted to real and they cannot be estimated directly on a real basis…plus why it is better to adjust CF’s and not discount rate…that should suffice.