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I have come across a ques in kaplan GXG CO (a) where it says to calculate dividend valuation model but in the answers it shows a calculation of discount factor as well. why is it done and which numbers do we take for that?
I do not have Kaplan books (only BPP), but I do have the original exam question.
Unless Kaplan have changed the question for some reason, then the only discounting in part (a) is to bring the answer from the dividend valuation formula back to present value, by discounting for 2 years at the cost of equity (because the dividend stream starts 2 years late, at time 3 instead of at time 1).
The cost of equity of 9% is given in the question.
I explain the need for this (with examples) in my free lectures. The lectures are a complete free course for Paper FM (was Paper F9) and cover everything needed to be able to pass the exam well.
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