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Hello sir,
For the part a, when calculating the perpetuity, I did it as (262.55/9%-2 25%)*(1+9%)^-4=2756
However in the answer, it did this 262.55*1.0225/(9%-2 25%)*(1+9%)^-4= 2817.51
Second question
Still part a, while calculating the additional value created ,it subtracted the 480 from it..why?
I thought it should be as such: 2201.94+480-1218.Can you please explain sir?
Thank youFirst question:
We use the dividend growth formula, and the numerator (Do(1+g)) is the flow at time 5 which is 262.55 x 1.0225 (given that 262.55 is the flow at in 4 years time).
Second question:
The additional value created is the new total value (2201.94) less the total of the current values (1218 + 480).
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