Abstract
Inflation is one of the most important indicators taken into account when issuing issuer ratings. It affects the weighted average cost of capital WACC and the cost of equity k0, which are used (should be used) as the discount rate for discounting financial flows in the ratings. Inflation also affects the dependence of discount rates (WACC and k0) on the leverage level L. Adequate accounting of inflation will contribute to the issuance of correct issuer ratings.
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Brusov, P., Filatova, T., Orekhova, N. (2021). Inflation in Brusov–Filatova–Orekhova Theory and in Its Perpetuity Limit–Modigliani–Miller Theory. In: Ratings. Contributions to Finance and Accounting. Springer, Cham. https://doi.org/10.1007/978-3-030-56243-4_16
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