[sabitha]

But here they are using ke not wacc
So this means if the cash flow are free by using ke we get the cash flows for both the equity and debt holders
But i still confuse with the using ke and the wacc
In this case if we use wacc rather ke we get a diffrent answer

[sabitha]

I mean i got 16.1 % as cost of equity but answer is quite diffrent its from pre mock june

[sabitha]

Can i get the answer key for the mock exam

[sabitha]

4. Fernwell wants to buy shares of Gurst Co in two years. Fernwell uses the dividend valuation model with orname dividend growth rate of 5%

If Fernwell’s discount rate is 10% and Gurst has recently paid a dividend of $20 per share, what is the price per share that Fernwell will pay?

A. $400

B. $420

C. $441

D. $463

But sir in this question by calculating the second year value of the share we applied 3 rd year growth and the discounted by using dividend growth model

[sabitha]

Sir one more doubt in case of delayed perpetuity if assume the perpetuity starting from 2 nd year the we multply the first year discount factor what is the reason why we multplying first year discount factor can you explain this logically sir…

[sabitha]

So this means by using this formula by applying 3 years growth we get 2 nd year pv is it??? Here the question asking about what is the share prize in 2 nd year so we applying growth for 3 years
Is it my assumption true sir….

[sabitha]

No sir its wrong the answer is option d

[sabitha]

By solving bpp many times you can’t score 90 there may be chance for fail on your exam the main propose is gain more knowledge by doing varety of question not only from bpp also from kaplan and also from study hub and you also prefer on theory’s because f m is a theory based exam and also problamatic

[Author]

Posts