Have all of you actually memorized the whole process of calculating nominal and real cash flows ? Anything specific that you all are focusing on in that huge process
There are a few conceptual points but that’s it. If they ask us to calculate anything I’m guessing B and moving on.
Schweser says that it’s unlikely we’d have to do that whole calculation, but you should probably know the other stuff, like why projecting cash flows is better than changing the discount rate.
this is my cheat sheet Dep, EBITDA, Capex - measure in real terms Cash taxes, Capex - nominal terms and then use inflation index Valuation with Real CF @real =Valuation with Nom CF @nominal real ratios tell the true story adjutmensts to CF preferred over adjusting WACC - remember reasons for this some ways to calculate each part of WACC - beta, RFR, after tax debt cost, ratio distortions - nwc/reveneus is unaffected other ratios - look at the ratio and figure out if over/understated
you know if everyone picked B, score distribution would be something to see. See, the error term now is homoskedastic: everyone picks random alternatives (A, B, or C) all in random, that’s good for the distibution. But if we all conspire to pick B when in doubt, there would be a serial correlation in there.
Dreary Wrote: ------------------------------------------------------- > you know if everyone picked B, score distribution > would be something to see. See, the error term > now is homoskedastic: everyone picks random > alternatives (A, B, or C) all in random, that’s > good for the distibution. But if we all conspire > to pick B when in doubt, there would be a serial > correlation in there. hahahaha… based on Darwins theory i’ll definitely not go with b if i have to guess… 
I thought EBITDA, capex, and depreciation are in real terms and net working capital, cash taxes, and the EBITA to find the cash taxes were in nominal terms.
that’s exactly what i said Dep, EBITDA, Capex - measure in real terms
chowder Wrote: ------------------------------------------------------- > Cash taxes, Capex - nominal terms and then use > inflation index But then you said capex is in nominal terms. Do you value capex in real terms first or “nominal-and-then-convert-to-real-terms-with-inflation-index?”
i meant net working capital for nominal -> inflation -> to real my bad
please select B if we get a question on this. no really–everyone select B.