- This topic has 5 replies, 2 voices, and was last updated 6 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
Viewing 6 posts - 1 through 6 (of 6 total)
- You must be logged in to reply to this topic.
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Delayed perpetuity with annual growth
Hello
The technical article on business valuation dated 18/08/2015 says that delayed perpetuity is calculated using (1/(r-g)*previous DF)…… However in the BPP book it says that it is calculated using 1/r-g.
Which one is to use???
Thank you
The BPP book does not say that!
The dividend valuation formula (which is what this is) gives the PV of any inflating perpetuity starting in 1 years time.
If the perpetuity starts later the it gives a PV later, which then needs discounting to get a PV now.
So, for example, if the perpetuity starts in 4 years time, then since this is 3 years later than the normal 1 years time, the formula will give a PV in 3 years time. You therefore then need to discount it for 3 years in order to get back to a PV now.
this is odd i can see 2 posts but cant see the answer when i open the post….I can only see mine….I am logged in
ah no now i can see it
i just noticed what they did. They just split the formula into 2 parts.
Thank you.
You are welcome 🙂
(and your browser probably had the original page in the cache – it is happens again then just refresh the page 🙂 )