How can you adjust the discounted cash flow model for inflation and currency fluctuations?
The discounted cash flow (DCF) model is a popular method of valuing an investment or a project based on its future cash flows. However, the DCF model assumes that the cash flows are constant and unaffected by inflation and currency fluctuations. In reality, these factors can have a significant impact on the value of an investment, especially in emerging markets or volatile environments. Therefore, it is important to adjust the DCF model for inflation and currency fluctuations to get a more accurate and realistic valuation. In this article, we will show you how to do that in four steps.