Authors:
Debashish Dutta,Sudipta Ghosh,Arpan Dutta,BalaramKar,Debasish Kundu,DOI NO:
https://doi.org/10.26782/jmcms.2015.10.00005Keywords:
Present value of cash flows,Expected rate ofreturn ,Value of money,Inflation,Purchasingpower of money, Discounting rate, Annuity,Abstract
The sole aim of this paper is to calculate present value of periodical cash flows(fixed time interval)from an investmentconsideringthe effect of inflation,where cashflowis fixed (anordinaryannuity),orin a constant growth, or in a random nature.Incommon practice the discountingrateis equal to the expected rate of return of theinvestorfor calculating present value, but in reality this is not equal.The reason is thatthe expected rate of return is affected by the change of price level, that’s inflation,andthat’s whythisdirectlyaffectsthe purchasing power of moneyof the investor.Toprevent the purchasing power from the inflation, some adjustment is required forcalculating actual discounting rate. This paper providesthemethod of calculatinginflation adjusted discounting rateandc alculating adjusted present value of future cashflows. It also providesthecorrect investment decisions from various investment opportunities.Refference:
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Author(s): Debashish Dutta, Sudipta Ghosh, Arpan Dutta, Shilpi Samajpati, Balaram Kar,Debasish Kundu View Download