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9 KAPLAN REVISION KIT QUESTION 67 CORHIG CO (JUNE 2012 MODIFIED) HELP!!!

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March 1, 2016 at 11:57 pm #302940
crashog
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F9 KAPLAN REVISION KIT QUESTION 67 CORHIG CO (JUNE 2012 MODIFIED) HELP!!!
Question 67 – Corhig Co (June 2012 Modified)
Part (b) requires:
Calculate the current cost of equity, using this value, calculate the value of the company using the DVM.
I have looked at the answer but cannot understand how the denominator of 1.12 and 1.123 were arrived at as used in the PV of year 2 and 3 dividend calculation, respectively. Any suggestions please?
March 2, 2016 at 1:23 pm #303015
fbawany
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Hi crashhog,
That is just saying 500,000 / 1.12 / 1.12 – so that ‘2’ and ‘3’ is just for power. Instead is writing it out twice, they have just said, 500,000 / 1.12 (to the power 2 – for 2 years, then to the power 3 for 3 years)
I hope that helps
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