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Present value

Forums › ACCA Forums › ACCA MA Management Accounting Forums › Present value

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by AvatarJohn Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • October 16, 2014 at 1:23 am #204544
    Avatarsaahath
    Member
    • Topics: 5
    • Replies: 4
    • ☆

    Do we need to adjust for inflation before discounting, when calculating NPV?

    October 16, 2014 at 3:43 pm #204603
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54848
    • ☆☆☆☆☆

    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
    Avatarsaahath
    Member
    • Topics: 5
    • Replies: 4
    • ☆

    Thank you Sir 🙂

    October 18, 2014 at 9:37 am #204805
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54848
    • ☆☆☆☆☆

    You are welcome, Saahath 🙂

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