IN part A, the answer takes 250,000 x 1.03% = 257,500 ( it means that it takes account of inflaction already in calculating required return)
I dont really understand why when the answer gets 4.82% for return, it takes 4.82% + 3% = 7.82% for the required return. why we have to add 3% inflation rate to 4.82%. We alread account for 3% in calculating livng expense increase.
Question number 8, part C in the same exam,
The company calulate profit and loss for PLN without taking accounting for hedge effect. The question clearly says that the company uses currency hedge for its principle value. according to my calculation, the profit and loss should be 435,000 instead of 400,000.
Hope someone have time to look at it
Thank you for your time and good luck to you on the exam!