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Dear John,
In calculating value after redundancy and benefit we get PV of CF 5481 and we add this figure to 128.My question is shouldn’t we use dividend valuation model for this part to get the value after y4. Because if it was initially included in FCF then automatically it would have been included in Div valuation model.
No, and the reason is the last sentence in the question under the heading ‘possible additional post-acquisition benefits’.
It says that the cash flows would increase for the next 3 years (so 4 in total).
I do see your point, and accept that you could read this sentence in different ways. The examiner would therefore have still given full marks if you had interpreted it in your way (even though the final answer would obviously have been different).
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