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Cigno sep dec 15

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Cigno sep dec 15

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 1, 2018 at 4:59 pm #439594
    ashikhkonvict
    Member
    • Topics: 6
    • Replies: 7
    • ☆

    Good day sir,

    I jus want to clarify, while calculating free cash flow, for calculating the value to equity, shouldnt we discount the perpetuity to present value?

    March 2, 2018 at 9:16 am #439654
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    Yes, and that is what the answer has done. However you can only use 1/r is it is a constant cash flow. Here it is not constant and so the first 4 years have to be discounted individually, and then there is an inflating perpetuity from time 5 onwards so they have discounted using the dividend valuation formula.

    March 2, 2018 at 9:18 am #439655
    ashikhkonvict
    Member
    • Topics: 6
    • Replies: 7
    • ☆

    Thank you sir.

    March 2, 2018 at 10:12 am #439690
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Cigno sep dec 15’ is closed to new replies.

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