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Hi Sir,
“Machinery parts manufacturing business unit” bundling Option-2 MBO , while calculating estimated foreseeable value (435*1.08)/0.1=4698
then figure should have been discounted for year 1. which would be 4698/(1.1^1),
As its says in the question 8% increase on first year and the value 4698 is first year end value as we multiply by 8%.thanks
The printed answer is correct.
Multiplying by 1/r gives the present value of a perpetuity on the assumption that the first cash flow is in 1 years time.
If you are still at all unsure about the discounting then do watch the free Paper MA (was F2) lectures on discounting, because the discounting itself is exactly the same at Paper AFM.
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