perpetuity

This topic has 3 replies, 3 voices, and was last updated 9 years ago by John Moffat.

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May 15, 2017 at 1:46 pm #386283
Saimon
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Sir,
suppose perpetuity starts from year 5, DCF 10%
So can i calculate pv of cash flow at year 5 in following way

perpetuity 1/0.10 = 10
annuity
(4year) (3.170)

Difference = 10 – 3.170
= 6.830

pv at year 5 in perpetuity = FV * 6.830

Actually i didn’t understand the Logic behind the calculation given in BPP text book
May 15, 2017 at 5:41 pm #386320
John Moffat
Keymaster
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Yes – you can calculate it that way 🙂

The answer will be exactly the same apart from rounding (because the tables only go to 3 decimal places) but that is not a problem in the exam.
May 16, 2017 at 2:48 pm #386486
Noureen
Participant
- Topics: 14
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Hi John

Can you please explain this bit.

pv at year 5 in perpetuity = FV * 6.830?

Many Thanks,
Noureen
May 16, 2017 at 8:21 pm #386534
John Moffat
Keymaster
- Topics: 57
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No!

You should read the earlier posts and watch the free lectures.

I am sorry, but I am not going to type out all of my Paper F9 and Paper F2 (because this is revision of F2) lectures here 🙂
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