Hi guys:
During one of my interviews, I encountered the following question: the interviewer asked me when is it more appropriate to use inflation-adjusted costs, and when is it better to use gross (non-inflation adjusted costs) in financial modelling, and how does that affect items in its capital structure.
For the 2nd part of the question, I figure it would be about debt--inflation adjusted would make debt more expensive. Is that correct? However, how does one model inflation-adjusted costs, and in what situations / what kind of deals is this more appropriate?
I'd really appreciate your thoughts on that! thank you!