Inflation - Worked Examples

Example 1 — Find the market rate for real return 6% and inflation 4%.

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Example 2 — Find the real rate if the market rate is 11% and inflation is 3%.

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Example 3 — Escalate a PHP 2.0M base-year cost for 5 years at 4% general inflation.

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Example 4 — Compare exact versus additive market rate for real 8% and inflation 5%.

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Example 5 — Which rate should discount a constant PHP 1M/year series stated in today's purchasing power?

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Example 6 — Which rate should discount a future maintenance series already escalated by expected general inflation?

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Example 7 — A labor cost rises 7%/year while general inflation is 4%. What should be modeled?

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Example 8 — A real annual benefit is PHP 500k for 4 years, real rate 5%, inflation 3%. Show the two valid analysis routes.

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Example 9 — Identify double counting: revenue forecast already rises 4%/year for inflation, then analyst adds another 4% inflation escalation.

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Example 10 — Deflation case: real rate 5% and general inflation -2%. Find the market rate.

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Example 11 — Labor escalates 7%/year while general inflation is 4%. Find labor's exact real relative-price escalation.

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Example 12 — Verify one-period real/market equivalence for a PHP 1.0M category cost with specific escalation 6%, general inflation 4%, and real discount rate 5%.

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