Illustration 39 vs 28

We have solved a question similar to Illustration 28, where the initial growth rate was 18% for the first four years and then declined linearly to 14%. While solving that question, we included the 8th year (i.e., the year in which the growth rate declined to 14%) as part of the explicit forecast period, computed its present value separately, and then calculated the present value of the price at the end of the 8th year. However, in the present question, where the growth rate declines linearly to 16%, we have not considered the 8th year (i.e., the year in which the growth rate reaches 16%) as part of the explicit forecast period. Instead, we have taken the value at the end of the 7th year itself and computed its present value accordingly. Could you please clarify the rationale behind this difference in treatment ? Video Details ------------- Advanced Financial Management - AFM Security Valuation - Equities #76. Illustration # 39 - Multi stage dividend model

Mhd Mmp

CA Final

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03-Apr-26 21:31

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