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Sir a perpetuity starting in 2 years time means that when we calculate the perpetuity the value we get is at the end of Y2. So why do we apply the discount factor of year 1.
Like in one question(110 mcq bpp kit) $10000 cash flows every year and rate 0.08.
So why (10000/0.08)×0.926 and not (10000/0.08)×0.857Using the discount factor 1/r for a perpetuity starting in 1 years time gives the present value (i.e. the value at time 0)
If the perpetuity starts in 2 years time, then it is starting 1 year late and therefore the PV will be 1 year late i.e. at time 1 instead of time 0.
The BPP answer is therefore correct 🙂
(My free Paper F2 lectures on this will help if you are still not clear, because it is revision of F2)
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