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Hi, I was hoping that you could help me. When calculating the value of equity of Tai pre the acquisition, the examiner has used free cash flows and the growth model, however they a have not discounted down to present value and the figure used is only the value of the next 3 years of growth (1400m) not the 1400m + 108.7m. Why is this ? I hope my question is clear !
Kind regards,
I don’t know where you are getting 3 years from.
The question says that the cash flows will grow at 3% for the foreseeable future, and the growth formula gives the PV for a flow starting in 1 years time.
Also, we don’t add on the current cash flow, we are looking at the expected future cash flows.
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