When calculating the present values for the sake of computing NPV, should we use nominal or real interest rate?

CHB

your question is also mine. In the pratice problem of Module 5, exercise 5.3 uses nominal rate to calculate NPV but in 5.6, the rate used to calculate NPV is real rate.

The book says that the results are the same. But why do we need to change real rate to nominal rate for calculating the NPV ???.

i believe it has to do with whether the future cash flows are in nominal or real terms. if they are in real terms, use the real rate...if nominal, use the nominal rate...then you get the same answer

[NEAS: Correct.  If cash flows are in real dollars, use a real dollar discount rate.  If cash flows are in nominal dollars, use a nominal dollar discount rate.]