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Nominal cash flow is the true dollar amount of future revenues the company expects to receive and expenses it expects to pay out, without any adjustments for inflation. In the short term and under conditions of low inflation, the amounts attributed to nominal and real cash flows are nearly identical.
Cash flow is an accounting term that refers to the rate at which money comes into and goes out of a business. A positive cash flow indicates that more money came in than went out, and a negative cash flow indicates that more money is going out the door than the company is taking in.
Cash flow from investment (CFI) is used as an estimate of the level of net capital expenditures required to maintain and grow the company. ... Interest paid (net of the company's tax deduction) is a cash outflow that we add back to FCFE in order to get a cash flow that is available to all suppliers of capital.
WACC application is accurate only when the project is as risky as the overall company. Note that we may have to deal with nominal cash flows, which are not adjusted for inflation, or real cash flows, which are adjusted for inflation. ... Conversely, when we discount real cash flows we should use real interest rates.
A nominal interest rate is the interest rate that does not take inflation into account. It is the interest rate that is quoted on bonds and loans. ... As opposed to the nominal interest rate, the real interest rate adjusts for the inflation and gives the real rate of a bond or a loan.
in the most simplified version, nominal cash flow is the cash that you use today to pay for your expenses, i.e salaries etc... While real cash flow is cash flow that is adjusted for inflation, and hence it value compared to the nominal cash flow is less (given we have positive inflation which is the normal case in all economies). The difference is important in economies that are in a hyper inflation period (accumulated inflation during the past 3 years is 30% or more). It is also important for financial institutions either investing or lending for long horizons.
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