The impact of financing (part 2) - ACCA (AFM) lectures
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- Опубліковано 31 жов 2024
- The impact of financing (part 2) - ACCA (AFM) lectures
Free ACCA lectures for the Advanced Financial Management (AFM) Exam
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Hi, I am a bit unsure about the discounting. For example 2, senario 2, 70% debt and 30% equity, the lecturer said it's perpetuity, and divided by 5% the Risk free rate. --- my question is, why the formula is PV = FV/ r = 0.45/5% = 9 million ---- why it's not PV = FV/ (1+r)^n = 0.45/ (1+5%)=0.43 million
The discount factor for a perpetuity is 1/r. The formula you quote is for discounting just one single flow. I really suggest that you watch our free Paper MA (was F2) lectures on investment appraisal, because this is revision of Paper MA (and Paper FM).
@@opentuition Thanks a mill for your response, I will have a look at MA videos. : )