question 5, the one where you have to tell the difference btw their values based on diff assumptions:
Why do we put the -26.30 over (1.15)^10???
Why isnt the answer 26.3 because thats the difference???
26.3 is the future value
to make it present value, discount it by 1.15 for 10 years.
I was lost on this as well and I think it should be 26.3.
The question asks: Comparing Armishaw’s approach to terminal value to Stack’s approach, Stack’s assumption leads to a 2024 value that is approximately: The is asking for the differences in terminal value in 2024, not 2014 as the answer describes. This looks like a typo to me. Thoughts?
I agree. I think the wording was poor. There is no way to infer that we need to discount it back.
Relating to this question: they calculate TV2024 = RI2024/(1+r-w). Shouldn’t this be the value of TV for 2023?