Suppose the firm's WACC is stated in nominal terms, but the project's expected cash flows are expressed in real dollars. In this situation, other things held constant, the calculated NPV would

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When the WACC is stated in nominal terms (which includes a premium for inflation), but the cash flows are in real dollars (which do not account for inflation), the calculated NPV may be biased downward because the cash flows are being discounted at a rate that is too high (due to the inflation premium). This can lead to an underestimate of the project's true value.

Suppose the Firm's WACC Is Stated in Nominal Terms, but the Project's