PVGO Q

CFA Level II
#21

v = e/r + pvgo 4,000 = 380/0.12 + pvgo pvgo = 833

#22

I guess the value calculated thru DDM was supposed to be used as V in the equation, not the market price of the stock…rest agreed…any one else who did it this way?

#23

NR2: you are right about the formula, that it should be V = e/r + PVGO… but if I recall, the language of the question said something like , what is implied PVGO by current price (which was 4000). Hence answered A ) 883.

#24

yes 833 here too

#25

Where does $4,000 come from? I remember that the current intrinsic stock price should be $4,276. Therefore, PVGO -> $4,276 = E/r + PVGO = 380/0.12 + PVGO PVGO = $1109.

#26

4000 current market price

#27

yes the question specifically stated that.

#28

i went out to the car after AM session and reworked it and got 833, even though i picked the highest number on the exam…wasn’t happy about that one, but the real storm was still an hour away.

#29

shouldnt it be e1 in the formula? 4000- (380*1.045)/r=PVGO i got like 11xx something i think

#30

833

#31

what was the cost of equity according to capm? 17.2, or 12, and why

#32

I believe it was 17.2. Don’t know why.

#33

yea i used 17.2

#34

i had 17.2 because it was 10rf rate and beta of 0.8 and 9 mrp if that is the case, doesnt that same number of 17.2 need to be used on PVGO?

#35

can someone back me up on using 380*1+g ?? suppose to use next year’s earnings in pvgo calculation right??? anyone???

#36

finance03 Wrote: ------------------------------------------------------- > i had 17.2 because it was 10rf rate and beta of > 0.8 and 9 mrp > > if that is the case, doesnt that same number of > 17.2 need to be used on PVGO? No they specifically told you what to use in the Q.

#37

can we discuss specific Qs?

#38

kg Wrote: ------------------------------------------------------- > i guess the formula is > e1/r +pvgo > > the problem i faced was that E(0) was given and > not the next year’s earnings… cant recall the > answer though yea e0 was given…you just multiply by 1+g to get next years. I came up with an exact answer, so i figured it was correct since i assumed the joe bloggs answer would be 380/r+pvgo

#39

Has this been finalized yet? was it 667 or 883?

#40

Can we remember most of this set? - co value - 4127mm - require rate of return ??? - market risk prem - PVGO - 833 - justified p/e? - ???