Blipton (12/08) : Property terminal value issue

SSheryar10y ago

In answer , they derived the terminal value of property by inflating it with the real rate.So my doubt is shouldnt we inflate it by nominal rate because we are discounting cashflows by nominal rate.I mean if we use real rate for terminal value then we should use real rate to discount the cashflows right ?

John MoffatTutor10y ago#1

I know the wording is a bit confusing, but the actual rate of inflation applicable to the building is 8% and this is what they have used. (There is no such thing as a 'real rate of inflation')

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