Present value

This topic has 3 replies, 2 voices, and was last updated 11 years ago by John Moffat.

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October 16, 2014 at 1:23 am #204544
saahath
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Do we need to adjust for inflation before discounting, when calculating NPV?
October 16, 2014 at 3:43 pm #204603
John Moffat
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Yes.

We discount the actual (nominal) cash flows at the actual cost of capital.
Arriving at the actual cash flows involves adding inflation.

This is however not very likely at all at F2, it is at F9 where it becomes an important issue.
October 18, 2014 at 9:12 am #204794
saahath
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Thank you Sir 🙂
October 18, 2014 at 9:37 am #204805
John Moffat
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You are welcome, Saahath 🙂
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