# Equity SMGI PVGO

In Mendosa case, to calculate PVGO it is assumed that E1=E0 and basically E0 is used for PVGO but in SMGI case E1 is being used which is earnings forecast in next year. Can anyone please help me understand which one to use? E0 or E1?

V0= (E1/r) + PVGO edit: I just did a quick google search on this and now I’m confused. Check out these past forum topics… Seems like everyone disagrees. http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91312385 http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91319980

Per the book E1

exactly I have read all those topics and it seems that there is no consensus on how to calculate PVGO. This year CFAI changed Mendosa’s answer by using E0 (you can see on one of the threads that in previous years they answered using E1) but in SMGI case they used E1. I am so confused.

Sorry to bring this up again, seems like there has been no solutions for it so far. Anybody else look into this?

I have seen some mock questions use E1, and some use E0 for PV no growth.

Most recently though, Vitality Case in Mock 2015 seems to use E0 for their calculation of PV no growth. (question 46 Morning exam). They used EPS of \$5.04, which is E0.

In the CFAI Book Volume 4, EOC Q8, they also used E0 in their solutions.

But if you look at the 2015 Online Practice Tests, Mendosa Case, they used E1 in their solutions.

Anybody know which one is correct?

The last CFAI question I did on this “fortunately” didn’t have the solution as a choice when I used E1, but when I plugged in E0 there was a choice for that…

That’s how I’ve learned PVGO for this exam. So ridiculous.

Just done AM mock, they used E0/r and for the PVGO used E1*PR.

The book says V0 = E1/r + PVGO, this is very inconsistent. I’m not gonna count it as incorrect in my assesment.

The real question is what if it shows up on the actual?

A. Uses E0

B. Uses E1

C. Random method

The real question is what if it shows up on the actual?

A. Uses E0

B. Uses E1

C. Random method

The reason why in the mock exam they used E0 is because it is no-growth.

When there is no growth, E0=E1=E2=E3, …

so how come 2015 Online Practice Tests, Mendosa Case, they used E1 in their solutions.?

Anyone can help us on this?

They said no-growth in residual income, not earnings.

Again, all in all, the mock exam was poorly made.

I think we should just ignore Mendosa and always use E0

Then you would get the answer wrong because that’s not the formula. I just checked the Mendoza case, and they use E1.

If you check SMGI they used E1 and I see no difference between the two questions. They used E0 in Mock exam

No, the SMGI case uses the forecasted EPS which is E1 I believe.

The mock and EOC question 8 however both use E0.

Right, my bad burnout consequences

For exam purposes, it’s always E1.