[rakibasafeer]

Thank you sir! It’s very clear! 🙂 But if the perpetuity starts in 3 years we need to do the same as for 2 years right ?
Example : BPP Revision Kit 96, Take $90 000 per annum indefinitely starting in 3 years’ time (and bequeath this right to their children) . Cost of capital 11%
Should it not be : 1/0.10=10-0.826(2 year DF) = 9.174 multiplied by 90 000= 825 660 ?

[rakibasafeer]

Thank you very much sir! Ur explaintaion is very clear!
Normally perpetuies are calcutated by 1/discount factor into the relvant cashflows, so for this example it would be for tax part = 6000 into 1/0.10= 60 000
But in the BPP revision kit it is done as= 1/0.10-0.909( 1yr DF) so that is 10-0.909=9.901 and that into 6000 which is then 54 546!
But for the inflow of 20 000 it is done by 20 000 into 1/0.10= 20 000
Why is there two ways ? And how do we know to apply which way ?

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