Hello, Refering question 19 at the end of Schweser’ Reading 46: (pg. 186) To solve the problem I did the following: (1) calculated the value at year 10 which is = Dividend at year 11 / (r-g) = 1.25 (1.04)/ (0.12 - 0.04) = 16.25. (2) discount back to year 0, Current value = 16.25/ (1.12)^(10) = 5.23. My answer is wrong. I notice that Schweser (1) Calculate value at year 9, (2) Discount back 9 years… Can anyone kindly help me understand why is my method wrong?
I can’t believe this… I just logged in to ask the exact same question, Analyst76!!! I did the same as you did, calculated the Terminal Value at year 10 and then discount it back 10 years to get to the ‘wrong’ answer. I think it’s something to do with bad English or incorrect phrasing of the question as to what was expected from the solver??
agree… I think there might be some inconsistencies with the question…
you guys may want to check the errata!!