Nikon Coolpix 5000 Firmware 1.7- RAW Update 4 - 4-NOV-2002

From the feedback I get, there is still a lot of confusion about RAW. This update is the most important one so far, read it carefully if you want to make the most of it.

When shooting in RAW, the RAW data are stored in the NEF format but there is also a header that remembers the camera settings (EV, sharpening, contrast, etc) when the picture was shot. When you open the NEF in Photoshop it will convert the Raw data based on the header settings and based on any EV or white balance adjustments you can make in the dialog box (screenshot below). So if you shoot the same scene once with sharpening OFF and once with sharpening ON and open them in Photoshop, you will see a big difference between the two because Photoshop will apply sharpening based on the settings in the RAW header.
Nikon Capture offers much more control. Just like Photoshop, it will process the RAW data based on the header settings when you open it. But while with Photoshop can only adjust for Exposure and White Balance, with Nikon Capture you can adjust many more parameters, including sharpness. When changing sharpening settings, Nikon Capture will recalculate every pixel based on the original (unsharpened) RAW data and the new settings.
If you open the RAW file shot with sharpening settings at high and change the sharpening to None in Nikon Capture (as indicated in this screenshot), it will look virtually identical to the RAW file shot with no sharpening.

Conclusion: if you do not have Nikon Capture it is recommended to shoot RAW with sharpening off.
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