The reading on valuing emerging market companies confuses me somewhat. Mainly becuase, most of the reading the text tells you to match the real rate with real cash flows and the nominal rate with nominal cash flows…i get that, be consistent.
However, then the text addresses either adjusting the WACC for country-specific risks (such as inflation) but explicitly says either include this consideration (and the other country-specific risks) in the WACC in the form of a premium or adjust the cash flows, BUT NOT BOTH.
So why must we pair a nominal WACC when discounting nominal cash flows if the book then says we can either capture the risk of inflation in one or the other ??? Are they referring to inflation in two different lights here?