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Ok, so in other words, add inflation first, then calculate before tax nominal return.
Thanks

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had to get out of the house. somehow, this is my fault, this thread got confusing. i’m not actually sure that florin and i are even disagreeing.
at the risk of making it more confusing.
say you have an after tax required return, that has not included an inflation component. say 4% is the after tax requirement. tax rate is 20%.
so your pretax return requirement is 5%.
if inflation is 2%, you are saying you would go,
(4%+ 2%)/.8 = 7.5%?
and i would go, 4%/.8 = 5% then add 2% inflation to get 7%.
is this what we are saying?

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yes I would do first one

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upon thinking about this some more, i think you are right, florin. thanks. i guess i was thrown off by the ingram case. in that case, didn’t they get the pretax retun then add the inflation rate on top of it?

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wow. sorry florinpop. you are absolutely right. i’m not sure what i was thinking. you added the inflation to the pretax return so it could be taxed. there is nothing to be confused about with the ingram case. sorry for causing the confusion. i think i’ve hit my limit.. going into the gips ethics meditative state. good luck on the test..

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