Hi friends,
if anyone could please share the solution for the BKM book or ateast the answer key.
Thanks,
VC
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Hi friends,
if anyone could please share the solution for the BKM book or ateast the answer key.
Thanks,
VC
You can try this link:
http://leeds-faculty.colorado.edu/Madig ... utions.htm
Hey Neetu,
Many thanks.. its the thing that i was looking for....
thanks again :D
Varun
Welcome Varun!
:)
If you find something better, please post it here.
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???
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... :?:
Did you try to use comparable co.s method to see how much terminal value you get?
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
That was an interesting question and a good answer! :)
Hi Neetu,
Few things you should keep in mind while using that formula is that:
For high growing companies you estimate the years for which the company will remain a high growth firm, and the stages in which it will finally taper down to the perpetual growth (which in most cases will be the GDP growth rate), the formula you have put in is only applicable for the perpetual growth case and not for high-growth years and hence "k" will be greater than "g".
Let me know in case any thing else needs to be clarified.