A bit confused when to use nominal interest rates and nominal growth and when to use real interest and growth rates in the FCFE
You use nominal cost of equity for discounting nominal FCFE. You use real cost of equity to discount real FCFE.
Thanks, but Q15 in Exam 2 morning session Schweser volume 1, where it does not state whether the cash flows are real or nominal. The only thing that is state, is a sentence stating " In the real rate analysis, General uses a modified build up model for calcualating required real return."
But I believe, this sentence is not enough to determine that the remaining cash flows are real.
Is there an adjustment for inflation in the required return ?