Wrong answers in CFAI Equity Section

Equity Section Reading 46: Private Company Valuation P. 683 # 9 They subtracted the 5,150,000 of cap ex and the 900,000. In my understanding, they should’ve only subtracted the 900,000, which is the change from last year in cap ex. #15. They take 28,800,000/(0.20-0.06) = 205.71 M But shouldn’t the numerator be multiplied by 1.06 (growth rate) = (28,800,000 * 1.06) / (0.20 - 0.06) = 218 M Thoughts?

on #9, you are wrong, the book is right. there are 2 separate lines discussing capex in the text. one is basically maintenance capex for the existing business (at 125% of depreciation, think of it as replacement cost + a big inflation mark-up). a second line of capex (the 15%) is to support new growth/growth initiatives. both numbers should be in there. on #15, don’t have time to read it, but i got the same answer as the book.