Question 1

What is the real (inflation-adjusted) rate of return?

Accepted Answer

The real rate of return is your nominal (stated) rate of return adjusted for inflation, calculated via the Fisher equation: real rate = (1 + nominal rate) / (1 + inflation rate) − 1. It tells you how much your money's actual purchasing power grew, not just the number on paper.

Question 2

Why does this matter for retention money or delayed payments?

Accepted Answer

Retention held for 12-24 months, or a payment delayed several months past the invoice date, isn't just a cash flow gap — the amount itself loses real purchasing power to inflation while it sits unreleased. ₹1,00,000 received today is worth more than the same ₹1,00,000 received a year from now, even before financing costs are considered.

Question 3

Is this the same as XIRR or NPV?

Accepted Answer

Related but different: NPV and XIRR discount cash flows by a chosen rate of return or cost of capital. This calculator specifically isolates the inflation component — what a nominal return or a fixed future payment is worth after accounting only for the erosion of purchasing power, which is a distinct question from discounting for risk or financing cost.

Inflation-Adjusted Returns Calculator

Real Value of a Delayed / Held Payment

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