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Dear Sir,
In part (a) of this question while calculating the PV of cashflows, I didn’t understand how the free cashflows have been assigned to each year.
As per the answer available in BPP, the cash flow for year 1 is 226.80 and 5% growth rate thereon.
But as per my understanding of the question the cash flow for Year 1 should’ve been 216 and then 5% growth thereon.
Thanks in advance!
The question specifically says that the 216 is in current value terms and therefore automatically the flow in 1 years time will have 1 years inflation.
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