Equity Valuation【 Reading 38】Sample
When valuing an emerging market company using cash flows expressed in both nominal and real terms: A)
| both valuations are not reliable. |
| B)
| both valuations are identical. |
| C)
| each valuation differs by the inflation differential. |
|
In order to adjust for the influences of inflation, company cash flows will require restatement in both nominal and real terms. Construct historical and forecasted financial statements in both nominal and real terms. Calculate the nominal cash flows and convert them to real terms. Discount the nominal and real cash flows to determine their respective valuations for both terms. The valuations under both terms should be identical. |