Quick question - IPS and Inflation before, return, question, required

Roflnadal

If you are required to calculate pre-tax return, do you add inflation before or after you perform the return/1-tax rate?
Thanks

hw0799

add inflation before you perform the return / 1-T calculation.

himanshumh

I would do before.
also when you have a net outflow from portfolio, and we have the inflation rate, do we always input the PMT as today cashflow*(1+inflation)?

MonkeyBusiness

there is an example in schweser videos - I think I got it now
first - they talk about long term return requirements - they use pmt adjusted for next years inflation ( expected to stay stable for the whole period)
second when asked about NEXT year return, they dont adjust for inflation

ishfaque

this was the ingrams

LBriscoe

yeah, i reworked the ingrams ips problem yesterday. in that case though, everything was done pre-tax. and inflation was added at the end. AFTER you got the pretax number, no?

cityboy

sorry florin, i guess you were referring to your own question..

ohai

for the long term return - they inflated next year payment - they calculated the return and then added inflation

jcfa2011

but to the original question posted by maagian. in the ingram’s case, they add inflation after they’ve already got the pretax return.

tikfed

cfasf1 - the rationale - since that is your question would be that inflation is taxed as well
if I make 100k in nominal terms - that is what I get taxed on, I don’t get taxed on 90k because 10% was inflation