The Red Devils travel to the Bernabéu for the first leg of their last-16 showdown against José Mourinho’s men.
And Ferguson, whose side trained in Madrid on Tuesday evening, believes that Wednesday’s encounter will prove to be the “acid test” of whether the Premier League leaders are up to scratch as genuine contenders for the title.
“Our team is capable of winning the Champions League,” Ferguson said at his pre-match news conference. “There is a great spirit about the players.
“People keep saying we’re not as good as past United teams but sometimes we get foggy impressions about the past and I do so myself at times.
“The reality is this team doesn’t know when it’s beaten which is a great quality.
“The acid test is tomorrow and we have to get through it if we are to win this trophy.”
Ferguson, who led United to a memorable Premier League, FA Cup and Champions League treble in 1999, admits that facing Real Madrid is a “dream” for a coach.
“I think it’s a good time for us to be playing Real Madrid,” he added. “We have a fantastic lead in our league and we have everyone fit. When you come to this part of the season you [often] have two or three players injured. We don’t have that, which is a bonus.
“We’re ready for tomorrow. Since the Champions League started, almost every year we have played one of the biggest clubs in the world.
“When I started as a coach many years ago, I dreamt I’d be playing against the top teams as a manager and you get the opportunity to do that in the Champions League on a regular basis.
“There is a special significance when you play the big teams and you’ll see that tomorrow. It’s just a shame we and Real are meeting this early. I wish it had been at Wembley, in the final.”
Ferguson also dismissed the suggestion that Wednesday’s clash may fail to live up to the hype, with the Scot predicting plenty of goals.
He said: “It won’t be 0-0 tomorrow night, I can assure you of that. This match can live up to expectations. History always plays a part in this type of game, as does the two teams’ desire to go forward.
“Real Madrid are one of the best counter-attacking teams in Europe. Their speed from box to box is fantastic. But we have to play our own game too. Our intention is to win and to score.”
The United boss also confirmed that Japan international Shinji Kagawa will feature at some point at the Bernabéu.
“We didn’t play Shinji Kagawa on Sunday because he had a long trip back from Japan,” said Sir Alex.
“I wanted him fresh in case I decide to use him tomorrow so I rested him against Everton. He will certainly be involved at some stage tomorrow.”
• Cristiano Ronaldo spent six seasons with United between 2003 and 2009. He scored 118 goals in 292 games, winning one Champions League and three Premier League titles, as well as one FA Cup and two League Cups.
• The sight of Ronaldo facing United for the first time since his departure adds another layer of intrigue to a contest pairing clubs who have met in four previous European Cup ties – with the winners going on to lift the trophy on three occasions.
• Madrid came out on top in three of the clubs’ four previous encounters – in the semi-finals in 1956-57 and quarter-finals in 1999-2000 and 2002-03 – with United prevailing in the 1967/-8 semi-finals.
MORE: The latest football news