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Hi John,
I dont get how to calculate the value of company using DGM method in part B. It is also in Kaplan kit but they have just copied and pasted the examiner method, they didnt expalin it any further. Would u please look in to it and may be explain it in a more logical and easy way so that i could get what is going on? Please. & to your knowledge, is there any other similar question he has asked before or after June-12? Thank you!!To be specific after discounting year 2 & year 3 dividends back to year 0, they calculated the pv of future dividends through DGM and then discounted it back for 3 years to year 0. My Q is Why didn’t they discount it from year 4 back to year 0. Because year 3 dividends are already given of 1000. These r basically dividends to be given after year 3. Please help.
The dividend valuation model give the MV now if the first dividend is in 1 years time.
If the first dividend is in more than one years time then we need to discount the answer to get the MV now. (So, for example, if the first dividend is in 3 years time (which is 2 years later than in 1 years time) then the figure coming from the formula will be 2 years later as well and will need discounting for 2 years to get a MV now)
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