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

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If the required rate of return is stated in nominal terms, it includes an inflation premium. However, if the project's expected cash flows are expressed in real terms, they do not take inflation into account. This means that the nominal required rate of return will overestimate the project's actual required rate of return, resulting in a downward bias in the calculated NPV.

Suppose the Firm's Required Rate of Return Is Stated in Nominal