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Inflation is a concept we have all become familiar with in our life. In recent times,...

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Finance

Inflation is a concept we have all become familiar with in ourlife. In recent times, inflation has been relatively low. In pastyears, we have seen inflation above the current low levels.

  • What are the key modeling issues we must consider whenincluding inflation in a financial model?
  • Why should we include inflation in financial models?

Answer & Explanation Solved by verified expert
4.3 Ratings (780 Votes)
Inflation in general will impact the cash flows projected and used under capital budgeting analysis and financial modeling But inflation will also have a similar impact on the hurdle rate discussed in the last paragraph When conducting a capital budgeting analysis or building financial models we need to make sure that inflation is treated the same in both the hurdle    See Answer
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Inflation is a concept we have all become familiar with in ourlife. In recent times, inflation has been relatively low. In pastyears, we have seen inflation above the current low levels.What are the key modeling issues we must consider whenincluding inflation in a financial model?Why should we include inflation in financial models?

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