Heads Up3: Present value of the real cash flows

Nominal required rate of return 14%

Real required rate of return 8%

Present value of nominal cash flows discounted at 14%: Rs. 16.75 billion

Present value of real cash flows discounted at 14%: Rs. 12.25 billion

Present value of nominal cash flows discounted at 8%: Rs. 23.78 billion

The present value of the real cash flows discounted at 8% is closest to:

A. Rs. 14.06 billion.

B. Rs. 16.75 billion.

C. Rs. 23.78 billion

B, Since the PV of nomincal cash flows dicounted at the nominal rate would have to be equal to the Real cash flows discounted at real rate