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Wurall Jan 2004

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Wurall Jan 2004

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.
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  • November 12, 2014 at 4:58 pm #209412
    stacie395
    Participant
    • Topics: 39
    • Replies: 54
    • ☆☆

    Hi sir, i wonder why for the valuation of the firm, we do not need to discount using its WACC of 11%…?

    Secondly, when we calculate the free cash flow for years 20X5 to 20X8, shouldn’t we calculate their present values…?

    Thanx…

    November 12, 2014 at 6:17 pm #209445
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54722
    • ☆☆☆☆☆

    We are discounting – when there is an inflating perpetuity we use the growth model to calculate the PV.

    Why would we want to calculate the PV’s for the years 20X5 to 20X8? Note (k) of the questions wants us to calculate the value in 4 years time.

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