can someone tell me why cfai continued to use (1+g) on the 2011 FCFE to find the value for 2010 ? If we are already given the year ahead, why are we taking it ahead another year?

#50 is asking you to calculate value based on the Dividend H-model Formula: D0 x (1+gl)/r - gl + D0 x (gs - gl) x H/r - gl D0 is dividend from I/S $48 divided by shares outstanding from balance sheet (50M) = 0.96 FCFE for 2011 is the same as D0 so don’t mix the two up. Only other adjustment you had to make was add the small firm premium of 2% to r to make it 13% and plug in the numbers

thanks zero. i see. i used FCFE in place of dividends in the H-model. I guess you can’t do that. only dividends can be used for the H model?

theCFAway Wrote: ------------------------------------------------------- > thanks zero. i see. i used FCFE in place of > dividends in the H-model. I guess you can’t do > that. only dividends can be used for the H model? H model is based on dividends not FCFE 3 main types of Dividend models: Gordon growth = D0(1+g)/r-g H model = formula above 2 stage model

thanks Zero!