
Again this illustrates the importance of calculations based on “nominal” not
“real” figures in a project finance cash flow (cf. §9.1) (i.e., taking the effect of var-
ious inflation scenarios into account).
§12.8 EQUITY RETURNS
The standard measurements of return on equity for investors in a project are
calculated on a cash flow basis, taking into account:
• The timing of the cash investment. As discussed in §13.3, there may be
a considerable gap between the time the equity is committed and the time it
is actually invested in cash. Rightly or wrongly, most investors assess their
return based on this cash investment, not on the funds they have at risk but ...