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?
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)