Models of time and value representation, interest conventions and inflation in project evaluation

CIM Bulletin, Vol. 83, No. 935, 1990

M.M. Hajdasiriski, Laurentian University

Any study in the field of theoretical investment analysis, or practical project evaluation, must be based on the assumption of one of the commonly applied models of time and value representation, and the corresponding interest convention. The lack of clear assumptions in this regard may easily confuse both the author of the study and the reader, and sometimes even lead to inaccurate results. In the first part of this paper formal definitions of the continuous and discrete models of time and value representation are introduced; in the second part, the importance of transparent assumptions is shown using a concrete example of inflation calculation in project evaluation.