sir i dont understand the PV of 20x7 upto infinity
Sir the formula to calculate the terminal value is
T.V= F.C.F(n)(1+g)/k-g
sir in the bpp kit they have done 0.42/0.1-(0.42*3.170)
i dont understand this what they have done
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Intergrand(SFM, 12/02)
8y ago#1I am away from home and do not have the BPP Revision Kit with me.
However I do have the original exam question, and none of the figures you have quoted appear in the examiners answer!!
Unless BPP have changed the question a lot, I have no idea why you want to calculate a terminal value - terminal values are not asked in the exam!
To get the present value (which is what is asked for) of an inflating perpetuity we use the normal dividend growth formula from the formula sheet (it gives the PV of any inflating perpetuity).
If what I have written helps at all then great. If not then ask again tomorrow - I am home tomorrow evening and then I will be able to look at the BPP kit myself and see if they changed the original exam question :-)
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