Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › General inflation on operating flow
- This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
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- May 26, 2015 at 10:16 pm #249355
Sir,
What is the easy to calculate the op flow when there have general inflation for selling price, variable cost, fixed cost ?May 27, 2015 at 7:54 am #249437If all the flows inflate at the same general rate of inflation then you can just inflate the net cash flow and then discount at the actual (nominal) cost of capital. Or alternatively, you can ignore the inflation and discount the current price flows at the real cost of capital (having used the Fisher formula to ‘remove’ the inflation from the actual cost of capital.
However usually in the exam they inflate at different rates and you have then no choice but to inflate each separately.
All of the above is explained in the free lectures.
May 27, 2015 at 6:48 pm #249656Thank you so much dear Moffat, it’s so nice of yours to give back to us always. U r the legend …..:)
May 28, 2015 at 8:15 am #249738You are welcome 🙂
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