Present value of cash flow from year 5

The first part of the answer - (2103 x 1.03) / (0.09 - 0.03) - is using the dividend growth formula from the formula sheet. You can use this formula to get the present value of any flow that is in perpetuity and inflating. g in the formula is the growth/inflation rate, with is 3%, and Re in the formula is the discount rate which is 9%. However, that formula gives the PV providing that the first flow is in 1 years time, and thereafter in perpetuity. However here, the first flow is in 5 years time, which is 4 years later than 1 years time. Therefore instead of giving a PV 'now' (time 0) it gives a PV 4 years later - i.e. at time 4. Therefore to get the PV 'now', we need to discount the answer for 4 years at 9% (which is the last part of the answer ( 1.09^-4) - although it is just as valid to multiply by the 4 year discount factor at 9% from the tables, rather than use first principles to get the discount factor)

Thank you John.

You are welcome :-)