Hi,
Can someone explain in this example when they have increased annual spending by real growth rate(after considering inflation) then why have they discouted using real risk free rate( Shouldn’t it be nominal risk free rate ? ) And next to this there is another BB example where they havent increased annual spending at all and kept it to $75000 for three years and discouted it with real risk free rate again.
Also can someone explain when to increase annual spending and when to keep it constant and in either case what discount rate to use?