• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

growth rate to perpetuity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › growth rate to perpetuity

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 24, 2022 at 11:33 am #656318
    zzzzzzzzzz
    Participant
    • Topics: 3
    • Replies: 1
    • ☆

    TAC estimates that the delivery and runner service business of eThunder will continue to grow after the takeover, with its revenue growing at a rate of 10% per year for the first four years after takeover, before stabilising to a growth rate of 4% per year to perpetuity thereafter.
    Ans:
    Year 1 2 3 4
    FCFF 250 275 303 332
    DF 8% 0.926 0.857 0.794 0.735
    PV 232 236 241 244
    PV from year 5 onwards = 244 (1.04)/ (0.08 – 0.04) x 0.735 = 4663
    Firm value now 232 + 236 + 241 + 244 + 4663 = 5616
    Less: Debt value now (2000)
    Equity value =3616

    My question: Why the calculation of PV for yr5 is using 244 but not 332?

    May 24, 2022 at 1:16 pm #656333
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    By all means use 332, but since the perpetuity starts 4 years late, the answer from the formula needs discounting for 4 years, which ends up giving the same answer.

    Again, this is all explained in my free lectures 🙂

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • umangkumbhat on What is Assurance? – ACCA Audit and Assurance (AA)
  • ahmadhoney on How to register with ACCA?
  • John Moffat on Interest rate risk management (1) Part 5 – ACCA (AFM) lectures
  • osman-the-zephyr@ on MA Chapter 1 Questions Accounting for Management
  • adebusola on MA Chapter 1 Questions Accounting for Management

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in