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Hi John,
The question I asked is from bpp revision kit number 74a. They used this formula for cost of equity D/Po+g instead of D(1-g)/Po + g.
Thank you
I only have the current edition of the BPP Revision Kit, and it does not contain a question called “Li”. So without seeing the question it is impossible for me to explain.
What may be the case is the following:
Do(1+g) is actually the dividend in 1 years time. (Do is the current dividend and so in 1 years time it will be Do(1+g).
Check whether the the figure they have used is the dividend that has just been paid (in which case they should use Do(1+g)) or whether it is the actual dividend in 1 years time (in which case they don’t need to multiply by (1+g))If this was a past exam question then say which exam and then I can find it another way 🙂
It seems you are using an old edition of the Revision Kit. If so then you really should buy a new edition because of the new format of the exam with more MCQ’s.
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