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Nominal vs real cash flows.

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EBITDA_TRAPS's picture
EBITDA_TRAPS

Can you help answer the following:

1.  Is this statement incorrect : if your property is generating nominal cash flows, your discount rate will include an inflation component?

2. Nominal cash flows include inflation and do nominal discount rates?

3. Real rates exclude inflation as do real cash flows?

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S2000magician's picture
S2000magician

Nominal cash flows should be discounted at a nominal rate (that includes inflation).

Real cash flows should be discounted at a real rate (that excludes inflation).

Simplify the complicated side; don't complify the simplicated side.

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