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Sir
After watching your lectures again and the one in particular about the cost of capital to be used in the valuation, I believe that number 2 of 3 is the one to use being the same WACC as existing as I do not believe there is a change in gearing and the business risk remains the same. However, I am not sure if one company has existing gearing and the other not like in this question…does that mean there will be a significant change and I must therefore use adjusted present value??
RegardsI am not sure I am looking at the same question as you are. Mock 1 Q3 in the edition of the BPP Revision Kit that I have is called Minprice Inc, and discounting it not relevant.
Maybe you have a newer edition – I am still waiting for the latest edition to be delivered to me.
It gives a choice of cost of capitals to use in the Dividend growth model cost of equity or WACC. So i am referring to your lecture, the 1,2 and 3 (that isn’t used anymore)
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