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Sir,
1) when we value company using FCF, why are we not adding year 0 value? Year 0 also has cash flow isnt it?
2) and when we use dividend growth model, the reason yr0 dividend is not added is because it has been paid out already. Is this correct?
Thank you sir
1. Year 0 actually means ‘time 0’ which is a point in time i.e. ‘now’. It is the start of the first year. Time 1 is one year later – the end of the first year / start of the second year, and so on.
The value of the company is the PV of the future earnings i.e. from time 1 onwards.2. Yes. It gives the ex div value, which is the value assuming that the current dividend has just been paid.
If you are still unsure then do watch the relevant Paper FM lectures 🙂
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Thank you sir
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