【正文】 2. 47 1976 40 . 61 5. 86 2023 11 5. 41 2. 58 1977 43 . 23 6. 45 2023 11 8. 58 2. 75 1978 46 . 37 7. 26 2023 12 2. 02 2. 90 1979 50 . 35 8. 58 2023 12 5. 65 2. 97 1980 55 . 00 9. 25 2023 12 9. 31 2. 92 1981 60 . 18 9. 41 2023 13 2. 96 2. 82 1982 63 . 97 6. 30 2023 13 6. 57 2. 71 1983 66 . 68 4. 24 2023 14 0. 26 2. 70 1984 69 . 21 3. 79 2023 14 4. 06 2. 71 1985 71 . 59 3. 43 2023 14 7. 89 2. 65 1986 73 . 46 2. 62 2023 15 1. 90 2. 72 1987 75 . 71 3. 06 2023 15 6. 05 2. 73 1988 78 . 48 3. 65 2023 16 0. 29 2. 72 1989 81 . 79 4. 22 2023 16 4. 73 2. 76 1990 85 . 34 4. 34 2023 16 9. 25 2. 75 1991 88 . 72 3. 97 2023 17 3. 83 2. 71 1992 91 . 16 2. 75 2023 17 8. 53 2. 70 1993 93 . 54 2. 62 2023 18 3. 33 2. 69 1994 95 . 67 2. 28 2023 18 8. 31 2. 71 1995 98 . 08 2. 51 A deflator table lists price deflators for a number of years. 8 CU7112997ECA Bain Math Inflation Real vs. Nominal Figures ?To understand how a pany has performed over time (., in terms of revenue, costs, or profit), it is necessary to remove inflation, (. use real figures). ?Since most panies use nominal figures in their annual reports, if you are showing the client’s revenue over time, it is preferable to use nominal figures. ?For an experience curve, where you want to understand how price or cost has changed over time due to accumulated experience, you must use real figures Note : When to use real vs. Nominal figures : Whether you should use real (constant) figures or nominal (current) figures depends on the situation and the client’s preference. It is important to specify on slides and spreadsheets whether you are using real or nominal figures. If you are using real figures, you should also note what you have chosen as the base year. 9 CU7112997ECA Bain Math Inflation Example (1) (1970 1992) Adjusting for inflation is critical for any analysis looking at prices over time. In nominal dollars, GE’s washer prices have increased by an average of % since 1970. When you use nominal dollars, it is impossible to tell how much of the price increase was due to inflation. $2,000 72 Nominal dollars % Price of a GE Washer 1970 71 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 $0 $500 $1,000 $1,500 CAGR 10 CU7112997ECA Bain Math Inflation Example (2) Price of a GE Washer CAGR (19701992) (%) % 1970 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Nominal dollars Real (1992) dollars If you use real dollars, you can see what has happened to inflationadjusted prices. They have fallen an average of % per year. 11 CU7112997ECA Bain Math Inflation Exercise (1) Consider the following revenue stream in nominal dollars: Revenue ($ million) 1990 1991 1992 1993 1994 1995 1996 How do we calculate the revenue stream in real dollars? 12 CU7112997ECA Bain Math Inflation Exercise (2) Answer: Step 1: Choose a base year. For this example, we will use 1990 Step 2: Find deflators for all years (from the deflator table): (1990) = (1991) = (1992) = (1993) = (1994) = (1995) = Step 3: Use the formula to calculate real dollars: Price deflator (current year) Dollar figure (current year) Price deflator (base year) Dollar figure (base year) Step 4: Calculate the revenue stream in real (1990) dollars terms: 1990: 1991: 1992: 1993: = , X = 1994: 1995: 1996: = X = , X = X = , X = X = , X = X = , X = X = , X =