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Dear Sirs,
I’m concerned about the Total PV of Cashflows (Year 5 to perpetuity), why it is discounted for 4 years, not 5 years, given the Cashflow of Y5 has been taken into account the growth rate of 2.25% for the Y5 onwards.
Many thanks, Sir
Mart
Using the growth formula gives the PV now (i.e. time 0 )when the first flow is in 1 years time.
Here the first flow is in 5 years time i.e. 4 years later than time 1. So the figure arriving using the formula will be the PV 4 years later than time 0 i.e. the PV in 4 years time. So to get the PV now, we then need to discount for 4 years.
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