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I have so much confusion to understand logic behind the calculations based on average capital employed area ..though I understand the numbers but don’t understand ..why ?
Why are we doing excess annual premium ..what it mean ?..then post tax calculation for excess premium …later pv in perpetuity I understand it from s requirement ..
In totallity is there a specific formula for Maximum premium ?can u please simplify concept
Also maximum premium on p/e ratio ..the numbers are fine ..but how we start and how we end up including what components ..like first they calculate strand p/ e ratio ..then post tax profit for both co…then current value ..I m mixed up with logics in here
Need your help sir
There is no formula to learn – it is simply following the instructions in the question.
The question says that the premium should be based on the PV of the excess annual earnings over the average capital employed.
The answer is simply following the instructions given in the question!!
Did you attempt the question before looking at the answer? That is the only way to benefit from using the revision kit 🙂
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