PROBLEMS OF BRINGING INVESTMENT DECISIONS IN CRISIS REQUIREMENTS
Keywords:
internal rate of return, net present value, nominal rate of return, nominal cash flows, expected inflation, real rate of return, real cash flows, required rate of returnAbstract
First of all the article defines real and nominal rate of return, with difference. ?o the real rate of return the expected inflation rate is included into the nominal rate of return. Afterwards, there are defined the real net cash flows which do not acknowledge expected inflation rate and the nominal cash flows counting on the inflation. The hypothetical case is shown how using dynamic methods ( net present value and internal rate of return) the profitability of feasibility projects is estimated, particularly when the nominal net cash flows and the nominal required rate of return are used, as well as using the real cash flows and the real required rate of return. There are also analyzed influence of the systematic risk, change of market rate of return and change of capital structure on the required rate of return as well as on the profitability of project.
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