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How would financing be affected with inflation?

Structured Finance Supply Chain Finance Export Finance
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Question added by Abdullah Mahhaden, CFA, CPA , Assurance Manager , Grant Thornton
Date Posted: 2013/06/16
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Lamia Matoussi
by Lamia Matoussi , Consultant , Deutsche Schule Tunisien

Inflation is embadded in the interest rate calculation, and it is part of the cost of capital. and they are positively correlated

 

ATIF KHALIL
by ATIF KHALIL , Finance Director , Wavetec Group of Companies

Interest rates are directly related with the rate of inflation, it means that finance expense increase as inflation rise.
Overall if I say that the Cost of Capital will increase with increase in inflation.

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