I just heard back from a gentleman at CFA Institute who:
- Agrees that there is inconsistency in the curriculum and practice/mock exam questions, and
- Assures me that their team will correct those inconsistencies.
There you go.
Nice 
Interesting. What I remember about these models is that the total valuation is a sum of the value of ongoing business operations plus the value of growth opportunities. You value the current business as a perpetuity and you value growth separately.
E1 would include a year of growth, so conceptually, one should use E0 as the base for ongoing businessses, and any amount between E0 and E1 should be classified as growth. However, I can see why people might start the clock on growth at 12 months from now. Nearly every other valuation method uses E1, so it’s nice to be consistent.
Mathematically, you can get the same total answer by either method, just by categorizing and discounting appropriately, but I agree that test-takers have a much greater obligation to be specific if they are asking for what portion of the valuation comes from current business and what portion is growth opportunities.
Should be E0 because it is measuring the no-growth piece of the pie, also hence no growth in the denomator. E1 is really an “end-of-year” concept, as if valuation date is Dec 31st. So it really depends on when the MV is measured…
Whooa!! thanks Bill!!
So just to be sure, we’re supposed to use E1 when calculating PVGO?
That’s what it says in the text, so that’s what I suggest that you use.