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  • Writer's pictureThomas Tsang

Nominal amount in valuation

Nominal amount means amount without taking into account of inflation in forecast. Then, in discount rate also not add the inflation rate.

Then will be consistent in both forecast and discount.

If we consider real cash flow, then the inflation is add in. Say 7% inflation rate, the discount rate should add 7% to reflect it. The result of NPV will be the same in both nominal value and real value.

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