Chapter 6 - Allowing for tax, working capital and inflation

Question 1

What should be assumed of working capital in the final year?

Answer 1

Reduced to 0

Question 2

In the Fisher formula ((1+i) = (1+r)(1+h)), what does ‘i’ mean?

Answer 2

The money rate (includes inflation)

Question 3

In the Fisher formula ((1+i) = (1+r)(1+h)), what does ‘r’ mean?

Answer 3

The real rate (excludes inflation)

Question 4

In the Fisher formula ((1+i) = (1+r)(1+h)), what does ‘h’ mean?

Answer 4

Inflation