In the part c of example 6 while calculating the market value in two years time, can’t we calculate it with this formula Po=Do(1+g)/(Ke-g). Taking Do=20 and growing it at 2 years compound rate of g i.e 6.75%, Ke=14.375% and g=6.75% But the answer is different in this case. Please explain!

Can’t the formula be used directly? Please clarify.

P (after 2 yrs) = [ 20c x ( 1+g)^2 ] / re – g

We get the answer 299 c.

But when we put (1+g) ^ 3 then we get the correct answer 319 c.

I know the short and easy method is to just multiply the correct M.V into the growth rate squared for number of years, but it’s bugging me why the Po formula isn’t working.

Normally when we use the formula, the numerator is Do (1+ g), which is the dividend in 1 years time. The answer is then the MV now.

If you want the PV after 2 years, (which is 2 years later than ‘now’) then the numerator needs to be 2 years later as well – i.e. the dividend in 3 years time, which is the dividend in 2 years time x (1+g)

In other words we can say that the M.V now ‘depends on’ or takes into account the future growth of dividends for at least 1 YEAR (expectation of shareholders).

Well explained! It’s as if you’ve just wiped the cobwebs in my mind and shone a light. Enlightening plus lightening(the burden) and lightens(cheers up) indeeeed!!!

I not only wish to learn and understand ACCA but also the art and skill of teaching which you’ve been blessed with, so that I can share and guide others and help them understand. The glow which comes in the eyes of the listener/student when you’ve explained something properly is a gift in itself. 馃檪

Using the dividend growth rate as I have done in the lecture is certainly correct!!

I cant really add anything to what I say in the lecture, and what I have written here in my previous replies.

There is no such thing as a ‘reformed cost of equity formula’. You use the dividend valuation formula (‘the growth model’) that is given on the formula sheet, and that is what I have done.

I attempted F9 for June 2016 and hope would clear this time. As P4 is advanced level of F9, I am planning to sit for P4 along with F6 for September session. I have also F7, F8 and all Ps to clear and I would like to ask you can I sit for P4 before clearing above papers.

It’s been always great and highly useful whenever I listened to your lectures. I had used your resources in retake when I failed in F9 in the first attempt when I self-studied. It was awesome and that alone enabled me to understand F9 topics and get a pass. Now, I would like start my P4 for Sep 2016 session. Can I use the same opentuition resources of Jun 2016 to prepare for Sep 2016 please? Or, are you going to make available the latest one shortly please?

Many thanks indeed Mr. John and your team. God bless you and full team.

There will be a new set of lecture notes uploaded later this month, and a few more lectures – but they are improvements rather than any real changes. So you can start using the existing notes and lectures 馃檪

Thank you very much indeed for your quick reply. And, the lecture notes for Sep’16 are already there now in OT! Wonderful! I will start using it immediately.

Hi there, I passed P1 in my first attempt. The credit goes to the excellent teacher Mr John. His teaching is really great. I would like to give many thanks to him for this excellent service for free.

Can I ask to the opentution administration where are the previous video lectures upto chapter 7 of P4? The video lectures start I can see starting from chapter 7. Please let me know if it is possible to watch other videos as I am eagerly dependent on from Johns lectures from the beginning.

There are no lectures for the first seven chapters – they are for you to read yourself and are a combination of background reading and revision of earlier papers.

Oh dear Mr.John, I missed you so much since F9 馃檪 So nice to have so great teachers during life! You inspire, make hard things understandable, and prepare people for life of finance. 馃檪 Thank you for sharing knowledge.

hi sir, i am currently using CASIO Scientific calculator fx 100MS. The answers for all the examples are as per your calculation shown in the lecture but for example 4 to calculate average rate of growth i cannot get the right answer as i think i am making mistake in typing it in calculator . So can you pls tell how to input it into the calculator. A very helpful lecture 馃檪 Regards,

Hello sir I had your lecture. . It was really good, easy to understand… It cleared all my questions regarding this topic specially for growth rate. . My next topic is mergers and acquisition, but I think they aren’t available at your topic list.

Thank you 馃檪 It is true that there is no lecture on mergers and acquisitions – mainly because there is nothing technical involved that is not already covered in the other lectures. It is more a question of approach. If you go to ‘Revision Kit Live’ from the main P4 page you will find some lectures working through a few question 1’s from past exams which will help you.

samphos says

Hello,

Where is chapter 1 to 6, please? I can’t find.

Thank you.

John Moffat says

If you mean lectures on those chapters, then there aren’t any.

It is because those chapters are really just background reading (and much of it is revision of P3), so they are for you to read yourself.

samphos says

Well noted. Thank you very much!

John Moffat says

You are welcome 馃檪

ocsolomon123 says

Good Day, please is it possible to download the video lectures?

John Moffat says

No – they can only be watched online.

It is the only way that we can keep this website free of charge.

jasminelili says

Good evening,

I cannot find lectures for P4 but I can watch any other lectures in here. Could you help me to find out why please?

Many thanks,

Jasmine

poonpoon says

The examples being shared in the video tutorial is from which book?

CH.7 Cost of Capital the first e.g

John Moffat says

The beginning of every lecture makes it clear that we are using the free OpenTuition lecture notes!

The link to download them is above the lecture!

Abuzar says

Hi John Sir

In the part c of example 6 while calculating the market value in two years time, can’t we calculate it with this formula Po=Do(1+g)/(Ke-g). Taking Do=20 and growing it at 2 years compound rate of g i.e 6.75%, Ke=14.375% and g=6.75% But the answer is different in this case.

Please explain!

John Moffat says

But the answer is exactly the same!

The dividend in 2 years time = 20 x 1.0675^2 = 22.791

Using the formula, Po = (22.791 x 1.0675) / (0.14375 – 0.0675) = 319

Abuzar says

got it sir

Thanks

John Moffat says

Great 馃檪

accastudentofoman says

Can’t the formula be used directly? Please clarify.

P (after 2 yrs) = [ 20c x ( 1+g)^2 ] / re – g

We get the answer 299 c.

But when we put (1+g) ^ 3 then we get the correct answer 319 c.

I know the short and easy method is to just multiply the correct M.V into the growth rate squared for number of years, but it’s bugging me why the Po formula isn’t working.

Thanks

Yahya

John Moffat says

Normally when we use the formula, the numerator is Do (1+ g), which is the dividend in 1 years time. The answer is then the MV now.

If you want the PV after 2 years, (which is 2 years later than ‘now’) then the numerator needs to be 2 years later as well – i.e. the dividend in 3 years time, which is the dividend in 2 years time x (1+g)

accastudentofoman says

In other words we can say that the M.V now ‘depends on’ or takes into account the future growth of dividends for at least 1 YEAR (expectation of shareholders).

Well explained! It’s as if you’ve just wiped the cobwebs in my mind and shone a light. Enlightening plus lightening(the burden) and lightens(cheers up) indeeeed!!!

I not only wish to learn and understand ACCA but also the art and skill of teaching which you’ve been blessed with, so that I can share and guide others and help them understand.

The glow which comes in the eyes of the listener/student when you’ve explained something properly is a gift in itself. 馃檪

John Moffat says

Thank you for the comment 馃檪

hamani787 says

My question is almost similar to “accastudentofoman” question.

I dont think that using the dividend growth rate to find the share price after 2 years is correct.

and I believe using the (reformed) cost of equity formula would give us a more relevant answer.

what do you think @opentuition tutor ?

John Moffat says

Using the dividend growth rate as I have done in the lecture is certainly correct!!

I cant really add anything to what I say in the lecture, and what I have written here in my previous replies.

There is no such thing as a ‘reformed cost of equity formula’. You use the dividend valuation formula (‘the growth model’) that is given on the formula sheet, and that is what I have done.

shahidcmr says

Hi Mr. John

I attempted F9 for June 2016 and hope would clear this time. As P4 is advanced level of F9, I am planning to sit for P4 along with F6 for September session. I have also F7, F8 and all Ps to clear and I would like to ask you can I sit for P4 before clearing above papers.

Regards

John Moffat says

You can take the P level papers in any order, but not until you have completed all of the F level papers.

(In future please ask this sort of question in the P4 Forum and not as a comment on a lecture)

shahidcmr says

Thank you Sir, my apology

John Moffat says

You are welcome 馃檪

sudheermambra says

Hello Mr. John,

It’s been always great and highly useful whenever I listened to your lectures. I had used your resources in retake when I failed in F9 in the first attempt when I self-studied. It was awesome and that alone enabled me to understand F9 topics and get a pass. Now, I would like start my P4 for Sep 2016 session. Can I use the same opentuition resources of Jun 2016 to prepare for Sep 2016 please? Or, are you going to make available the latest one shortly please?

Many thanks indeed Mr. John and your team.

God bless you and full team.

John Moffat says

Thank you for your comments.

There will be a new set of lecture notes uploaded later this month, and a few more lectures – but they are improvements rather than any real changes.

So you can start using the existing notes and lectures 馃檪

sudheermambra says

Dear Sir,

Thank you very much indeed for your quick reply. And, the lecture notes for Sep’16 are already there now in OT! Wonderful! I will start using it immediately.

Thanking you once again…

John Moffat says

Thank you for your comment 馃檪

tam1234 says

Hi there,

I passed P1 in my first attempt. The credit goes to the excellent teacher Mr John. His teaching is really great. I would like to give many thanks to him for this excellent service for free.

Can I ask to the opentution administration where are the previous video lectures upto chapter 7 of P4?

The video lectures start I can see starting from chapter 7.

Please let me know if it is possible to watch other videos as I am eagerly dependent on from Johns lectures from the beginning.

Many thanks

John Moffat says

It is Mike who teaches P1 – not me 馃檪

There are no lectures for the first seven chapters – they are for you to read yourself and are a combination of background reading and revision of earlier papers.

tam1234 says

Oh Sorry, I mistakenly wrote John rather I actually meant Mike.

Apologies please.

Thanks to let me know about the videos John.

Sangria9 says

Oh dear Mr.John, I missed you so much since F9 馃檪

So nice to have so great teachers during life! You inspire, make hard things understandable, and prepare people for life of finance. 馃檪

Thank you for sharing knowledge.

John Moffat says

Thank you for the comment 馃檪

mrs.azfar says

hi sir,

i am currently using CASIO Scientific calculator fx 100MS. The answers for all the examples are as per your calculation shown in the lecture but for example 4 to calculate average rate of growth i cannot get the right answer as i think i am making mistake in typing it in calculator . So can you pls tell how to input it into the calculator.

A very helpful lecture 馃檪

Regards,

khan says

very nice learning area thanku soo much

John Moffat says

You are welcome 馃檪

hasnain farooq says

hello these days i am in china and facing problem watching lectures what should i do………………………………………………..?

opentuition_team says

Use TOR browser. that should allow your access to vimeo..

Maryam says

Hello, I am in China too. try Webfreer…that’s what I use or Psiphon vpn on any device in case web freer stops working. hope it helps

123456rabia says

Hello sir

I had your lecture. . It was really good, easy to understand…

It cleared all my questions regarding this topic specially for growth rate. .

My next topic is mergers and acquisition, but I think they aren’t available at your topic list.

John Moffat says

Thank you 馃檪

It is true that there is no lecture on mergers and acquisitions – mainly because there is nothing technical involved that is not already covered in the other lectures. It is more a question of approach.

If you go to ‘Revision Kit Live’ from the main P4 page you will find some lectures working through a few question 1’s from past exams which will help you.

123456rabia says

Thanku:)

How can I get revision kit live?

John Moffat says

My fault – its not called Revision Kit Live for P4 馃檪

Here is the link:

https://opentuition.com/acca/p4/acca-p4-revision/