Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Nente Co (June \'12)

This topic has 3 replies, 2 voices, and was last updated 6 years ago by John Moffat.

Viewing 4 posts - 1 through 4 (of 4 total)

Author

Posts
May 28, 2016 at 11:50 am #317702
frahmani9
- Topics: 4
- Replies: 10
Hi John,

In part a of the question, do we not discount the free cash flow when arriving to the Equity value of Nente. In the answer booklet it has not been discounted?

thanks
May 28, 2016 at 4:02 pm #317753
John Moffat
Keymaster
- Topics: 57
- Replies: 50594
But they have discounted!!

What they have done is use the dividend growth formula from the formula sheet.

This formula gives the present value of any growing perpetuity (not only growing dividends).
June 6, 2016 at 6:43 pm #319988
frahmani9
- Topics: 4
- Replies: 10
Thanks John.

I think what I got confused about is that in other questions when calculating the value of a project and its perpetuity phase its then discounted at prior years discount rate as well as using the DVM formula.

However, this question is relating to valuing the firm now so we don’t need to discount prior year.

Correct me if I am wrong?

Thanks
June 6, 2016 at 7:14 pm #320018
John Moffat
Keymaster
- Topics: 57
- Replies: 50594
No – you are correct 🙂
Author

Posts

Viewing 4 posts - 1 through 4 (of 4 total)

You must be logged in to reply to this topic.