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Assuming we're using the cash-flows (Cf) and the required return rate (r) to calculate the Net Present Value (NPV), We need to follow the Rule of Consistency, which is to say, if our (r) is stated in real terms, we must use Real (Cf), and vice versa. Helpful formulas: To adjust Real (Cf) to Nominal, we compound it (n) periods, using the rate of inflation (inf), viz: (Cf-real) * (1+inf)^(n) Similarly, to adjust Nominal (Cf) to Real, we discount it viz: (Cf-nominal) / (1+inf)^(n) The Fisher Theorem illustrates the relation between real and nominal rates, viz: (1+r-nom) = (1+r-real) * (1+inf)
Wiki User
∙ 15y ago
Wiki User
∙ 11y agoreal cash flows do not have the impact of inflation where as nominal or money cash flows are adjusted for inflation.
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What is the difference nominal cash flow and real cash flow?
Difference between real and nominal cash flow is that nominal cash flows uses the inflation information as well for calculation of nominal cash flow of future while real cash flow don't use that information for calculation.
Is retained earnings a real account?
It is not a personal a/c, nor a nominal account, alike cash it is real a/c.
Can TVM be used to evaluate the real return or just the nominal return?
TVM, or Time Value of Money can certainly be used to calculate a real return. The only difference between a nominal return and a real return is inflation, so simply discount your future cash flows by anticipated inflation and you have a real return. In simpler terms assuming inflation is steady you could simply deduct inflation from your nominal return. For example a nominal 7% return with 3% inflation could be desribed as a 4% real return.
The GDP gap measures the difference between?
nominal GDP and real GDP.
What is the difference between 'real wage' and 'nominal wage'?
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How does the real interest rate relate to the nominal interest rate?
A real interest rate and a nominal interest rate are quite similar. The only real difference between the two interest rates are that a nominal interest rate include the cost of inflation where as the real interest rate does not.
Accounting in real estate cash flow game?
I have trouble in doing accounting work in real estate cash flow game. I have add. And it is very confusing. Can you help. Thank You Jerome Back
Is cash account real account?
yes cash account is a real account cause it wll not come under persanal account ( consist of bank and peoples account) and not a nominal account( consist of incomes and expenses)
What is a real estate cash flow note?
Cash flow notes are legal documents that promise the borrower will repay the lender. There are currently 60 types of cash flow notes. Read more at http://askville.amazon.com/exact-definition-term-cash-flow-notes/AnswerViewer.do?requestId=32026025.
Which types of accounts are closed?
Typically, nominal accounts are closed on a periodic basis..iincome and expense are nominal accounts. Real accounts ...such as cash, accounts receivable, accounts payable are real accounts are not closed and are carried forward to subsequenr periods.
Where can I find the definition for cash flow notes other than google?
Answers.Yahoo.com and Real-Estate-Online both have good definitions of what cash flow notes are.
Is unearned revenue is nominal account?
Unearned ravenue is liability account as revenue is not yet earned but cash received.
