When calculating inflation adjusted cash flows from nominal to real why won’t we leave the depreciation and fixed income cost alone? Weren’t these cost incurred on a ‘fixed’ cost base therefore inflation rate over years wont impact them?作者: therecruit 时间: 2013-4-2 11:45
Check the errata published. The answer should have been option B, instead of A.作者: dvilayphet 时间: 2013-4-2 11:46
big question - why wouldn’t inflation make a difference to them?
they were bought in the past, at historic cost, that is all good. but if you tried to buy them today - wouldn’t on going inflatoin have affected their prices? If you bought them today - wouldn;t you use a higher discount rate?
That is why you need to calculate them with the inflation index.
