I’m looking for a short cut to calculating economic income(question 33 in R27-P82). I think we might be able to avoid calculating the present value at time 0 and time 1. We know that the value of a share decreases when dividends are paid out. In Q33, we know that all cash flows will be paid out to bondholders and shareholders. I would think that the market value would decrease every year by these pmts to capital providers, but I’m not getting the right answers. Any ideas? If not, I guess we’ll have to do it the long way!
for present value calculation time is important, and here time passes as well, you need to include this into your calculation. it is like you calculate bond price in t0 then in t1 you are closer to maturity and some coupon(s) was(were) between during the year. And yield to maturity stays the same. I dont like economic income at all, I think it is stupid calculation. Sometimes I wonder how these things are used in practice.