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Blipton (12/08) : Property terminal value issue

This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.

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June 1, 2016 at 10:21 pm #318755
Sheryar
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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 ?
June 2, 2016 at 5:50 am #318786
John Moffat
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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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