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Earning yeild

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Earning yeild

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • May 29, 2021 at 11:54 am #622160
    vavneetb
    Participant
    • Topics: 175
    • Replies: 125
    • ☆☆☆

    Calculating the value of company B By reference of its predicted earnings
    The formula they given in book is
    Earnings(1+g)/ eaenung yeild-g
    But in the question they have used: earrings/ earning yeild-g.

    Earnings are expected to be 12.5 million next year and expected to grow 2% and earning yeild is 12%.

    Ans is 125m but following the actual formula answer comes to 127m.

    It’s section b ot question, will they still give mark?

    May 29, 2021 at 1:17 pm #622173
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    The correct answer is 125m, and there would be zero marks for answering as 127m.

    The numerator of the formula (earnings(1+g)) is the earnings in 1 years time, which is the current earnings with growth.

    Here, the question says that the earnings in one years time are 12.5 million and so we do not need to multiply by (1 + g)

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