Could you please help me with this quest in Kaplan practice exam. I’ve been practiced lots of quest in this kind but it seems that the solution for this quest is quite strange with me:
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They treated $2.25 as D1 while I considered it as D0. Any idea for this quest?
They haven’t paid it yet. Just beause it’s this year doesn’t mean that we should treat it as D0. Atleast in my mind I didn’t when I did the question
It’s straight verbiage. They expect to pay X this year. The expectation of a payment means it has not been actualized. The word choice should tip you off to the timing of the cash flow.
OK, got it. Thank guys.
Another issue, how about the D1 for the indefinite DDM?
In the answers, they use D1=2.25 * (1.2)^3
In my opinion, it should be D1=2.25 * (1.2)^3 * 1.05
Any idea for this issue?