11 Cash Flow Valuation in Inflation

Abstract

This is a course material from the book Investment Decision Making. For Firm and Project Valuation. The book is originally in Spanish and is untitled as Decisiones de inversión. Para la valoración financiera de proyectos y empresas.

Chapter 11 studies Project appraisal and firm valuation in an inflationary environment. We show how to value cash flows in an inflationary world: either at constant prices, nominal prices or relative prices. We study the flaws and assumptions of each method and select the appropriate procedure to perform the valuation.

Note: Downloadable document is in Spanish.

Keywords: Inflation, cash flow valuation, constant prices, relative prices, nominal prices

JEL Classification: G31