CERTYNEX IFRS ACADEMY

An analyst values an asset by discounting forecast cash flows in current money, inflation included, at a real market interest rate. What is the flaw in this calculation?

It omits the asset's market value, which must be added to the present value.

It combines nominal cash flows with a real rate, inconsistent on inflation.

He uses a rate observed in the market, whereas he should use the entity's own cost of capital.

It discounts over several periods, whereas a present value is computed over a single one.