Real cash flow

A real cash flow removes general inflation from a nominal cash flow. Divide the nominal amount by the cumulative general inflation factor from the base date to the cash-flow date, then discount at a consistent real required return. Real cash flows are not necessarily constant: a selling price or cost can rise faster or slower than general inflation. Specific inflation, changes in quantities and tax effects can therefore still change real amounts. Choose a consistent valuation basis and do not treat 'real' as an instruction simply to ignore all inflation.