Introduction

Overview

This lesson addresses the issues of constant, escalated values, nominal, and real prices, which are very important for project evaluation reaching several years into the future. In this lesson, you will learn the factors that will be considered in escalation and inflation as well as different factors to be considered in constant dollar and escalated dollar. Two examples will be shown on escalated and constant dollar ROR analysis and NPV analysis. An equation is also important and commonly used to convert escalated dollar ROR to constant dollar ROR with assumption of the inflation rate.

Learning Objectives

At the successful completion of this lesson, students should be able to:

• differentiate among the factors to be considered in escalation and inflation;
• differentiate among the factors to be considered in constant dollar and escalated dollar;
• understand how to conduct ROR and NPV analysis with escalated and constant dollar; and
• be fluent with the equation to convert between escalated dollar ROR and constant dollar ROR.

What is due for Lesson 5?

This lesson will take us one week to complete. Please refer to the Course Syllabus for specific time frames and due dates. Specific directions for the assignment listed below can be found within this lesson.

Questions?

If you have any questions, please post them to our discussion forum, located under the Modules tab in Canvas. I will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.