This topic contains 6 replies, has 3 voices, and was last updated by artem 3 years, 5 months ago.
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Home › Forums › ACCA Forums › F9 Financial Management Forums › An error in examiner answer? F9 2011 jun Q1 (b)
This topic contains 6 replies, has 3 voices, and was last updated by artem 3 years, 5 months ago.
To calculate PV of perpetuity cash inflow from year 5
2,308,000 x 1·03 x (1 – 0·3))/0·12
But it seems we should use
2308*1,03*(1-0,3)/(0,12-0,03)
isn’t it?
I think the formula for perpetuity is: cf per annum/ interest rate. Hence you only divide it by the interest rate
Yes, it is. But when there is a constant growth of 3%? Is it like dividend growth model? The whole PAT may be used to pay dividends, so it looks similar to DGM for me. May be I don’t understand something.
I don’t understand perpetuity either. I just hope it doesn’t come up. ATM I’m concentrating on the theory
2,308,000is the CF of year 4
Then 2,308,000X1.03 is the CF of year 5, the perpetuity is from the year 5 onwards.
(1-0.3) is the after tax rate.
Any problems?
Problem in denominator. Why it is 0,12 but not 0,12-0,03
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