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some conceptual confusion

Oovaiskhan14y ago
https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012f/f9_2011_dec_a.pdf this is the answer of last attempt in which in question 1 i cant understand the way of calculation of pv of tax liabilities in alternative method which is annuity method what i have been that first i have to derive of pv any annuity of years after 1 year is for say 2 to 6 years
first calulate annuity of 6 years then deduct discount factor of 1 year to get annuity factor of 2 to 6 years pllzz tell how did they do to get same annuity and in question 3 in business valuation via earning yeild method they ( growth incorporation) the put ey % instead of ke
why they did it although in book they said ke is there
waiting for your reply
John MoffatJohn MoffatTutor14y ago#1
The annuity is 2 to 6, and to get the discount factor you can either do it your way (annuity factor for 6 years, less annuity factor for 1 year) or alternatively you can use the annuity factor for 5 years and then discount for 1 extra year (using the ordinary 1 year discount factor).
Both methods give the same answer (apart from rounding, which is irrelevant.)

Using earnings yield for valuation is the same idea as doing a PE valuation. The value is based on the current earnings using the earnings yield of similar companies. It always ignores growth. (And the text book cannot say to use ke. Ke is used when doing a valuation based on expected future dividends)
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