Laceto 6/01

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September 2, 2016 at 8:28 pm #337141
Anonymous
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Hi John,

The answer in BPP for this question uses the present value of 19 to determine the terminal value shouldn’t we use the cashflow of 32?

Thanks you
September 3, 2016 at 7:41 am #337223
John Moffat
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By all means use 32 instead of 19, but because the inflating flow starts 4 years late (at time 5 instead of time 1) you would then have to discount the answer from the formula by 4 years to get a present value.

This would give exactly the same result 🙂
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