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Dec 2013 Q3

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Dec 2013 Q3

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by questforknowledge.
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  • November 25, 2014 at 1:45 pm #213133
    2009puser
    Participant
    • Topics: 7
    • Replies: 1
    • ☆

    PV of cash flows (years 5 to perpetuity) = 262.55 x 1.0225/(0.09-0.0225) x 1.09^1/4
    How to get 262.55 and annuity = 1-(1+r)^-n / r
    r=0.09 n= 4 how to apply it to PoV of cas flows years 5 to perpetuity?

    November 25, 2014 at 1:54 pm #213135
    questforknowledge
    Member
    • Topics: 29
    • Replies: 47
    • ☆☆

    i will help you by explaining and i hope you understand it because i am sure we will be meeting something like this on tuesday. 262.55 are the year four cash flows. thus if the perpertuity was to start from the year 3. use year 3 cash flows. the formular used is based on the formular P = D(1+g)/(re-g)
    in this case D is the year 4 cash flows. but since our perpetuity starts from year 4 onward, in order to discount it to year0 multiply the answer from above by the year 4 discount factor. it is just a matter of copying from the tables. dont worry yourself using the perpertuity formular
    hope it helps

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