Thread: Solution for Investments by BKM (Bodie, Kane, Marcus) ??

1. Solution for Investments by BKM (Bodie, Kane, Marcus) ??

Hi friends,

if anyone could please share the solution for the BKM book or ateast the answer key.

Thanks,
VC

3. Re: Solution for Investments by BKM (Bodie, Kane, Marcus) ??

Hey Neetu,

Many thanks.. its the thing that i was looking for....

thanks again
Varun

4. Re: Solution for Investments by BKM (Bodie, Kane, Marcus) ??

Welcome Varun!

If you find something better, please post it here.

5. Solution for Investments by BKM (Bodie, Kane, Marcus) ?

Originally Posted by neetu
Welcome Varun!

If you find something better, please post it here.

6. Doubts in Finance

I was working on valuation of high growth companies.
When I calculate the Terminal value, the formula used is:

Final Cash Flow(1+g)/(k-g)

where k = Discount Rate
and g = Long-Term Cash Flow Growth Rate

In my case, k = 8% and g is 10%, this generally doesn't happen and my valuation is -ve.

I am not sure where I am making some mistake. Any ideas???

7. Re: Doubts in Corporate Finance

I am not sure if your assumptions are right or not.
Isn't a growth rate of 10% too high?

I guess you can try verifying those rates... :?:

8. Re: Doubts in Corporate Finance

Did you try to use comparable co.s method to see how much terminal value you get?

9. Re: Doubts in Corporate Finance

Hi Ritesh,

The formula that you are using comes from a sum of a Geometric Progression. If you go back to the derivation of this formula, the basic assumption is k>g.

So, in your case the formula is not valid because k<g.

- Sougata

10. Re: Doubts in Corporate Finance

That was an interesting question and a good answer!