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Sir could you pls tell me how the discount factor of 4.2 is .9597,.9210,.8839 —- for the year 1,2,3 thanks.
You use the formula (which is given at the top of the discount tables).
the 1 year factor at 4.2% is 1/1.042
The 2 year factor is (1/1.042)^2
The 3 year factor is (1/1.042)^3
Thank you sir.
One thing more I wanted to ask while calculating beta why some time in question they use %of debt and equity and sometime the total market value. Many thanks.
I assume you are meaning when we are calculating an asset beta from an equity beta (or vice versa).
It depends how the information is given – if you are given the total market values then use them, if you are given the gearing as a percentage then use them. It makes no difference because in the formula it is effectively a ratio.
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