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For unbundling
The cash flows will grow by 8 %
So the formula
Fcf **(1+0.08)/ cost of capital – g …..isn’t it ??But the answer is only using cost of capital as denominator …why are not we substracting g from cost of capital in denominator ??
And I have another confusion that the answer is not discounted
Exam answer 435 * 1.08/0.1o = 4698
I did this 435 * 1.08/0.10-0.08 * 0.909
Would you please help me for ‘g’ and why not diiscounting ?
Thanks‘it is estimated that its after-tax net cash flows will increase by 8% in the first year only and then stay fixed at this level for the foreseeable future.’
Means they only increase in the first year and then remain at that level.
Silly complication imho.
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