The industrial project analysis, reflecting a planning horizon which varies from five to twenty years, is naturally exposed to wide conditions of uncertainty. One important condition of uncertainty is the inflationary phenomenon, which is dribbled by Economic Engineering with the utilization of constant value cash flow and real interest rates. However, in cases of tax analysis made after the income tax, the depreciation expenses will be monetarily devaluated by inflation. To demonstrate the penalties incurred with capital expenditures due to this phenomenon, the classical example "buy versus lease" is used for a sensitivity analysis of different inflation rates.Thus, changes are suggested in the traditional methodology of investment analysis in inflationary environment.
Economic Engineering; inflation; uncertainty; income tax; depreciation