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Values Growing Onwards vs. Values Growing to Perpetuity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Values Growing Onwards vs. Values Growing to Perpetuity

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • Author
    Posts
  • May 17, 2019 at 7:19 pm #516274
    hanna
    Participant
    • Topics: 5
    • Replies: 7
    • ☆

    Good day Sir,

    Is there a difference between a value growing onwards vs. a value growing to infinity?

    For e.g. 4 year onwards vs. 4 years to infinity.

    What implications do they have when the examiner says for instance:

    that “…the annual growth rate of the company’s free cash flows is expected to be 3% for the foreseeable future…” cited from Cigno Co Dec 2015.

    May 18, 2019 at 8:16 am #516305
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54684
    • ☆☆☆☆☆

    They both mean the same.

    The statement from Cigno means that the FCF’s will inflate at 3% in perpetuity.

    The discounting of inflating perpetuities is dealt with in our free lectures for AFM (and for Paper FM as well because it revision from Paper FM).

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