Doubts

Ex Set 3 Question 3

Ex Set 3 Question 3

by Roman Lorenz -
Number of replies: 1

Hello Julio,

I have trouble solving this exercise since I don't really understand why the PV of the Dividends in year 6 has to be discounted again in order to calculate the share price. 


Since the PV of the Dividends in year 6 already has been calculated, I thought I could just divide the sum of all PVs (55,6) by the discount rate (1,12^6).

Thanks for your help!

In reply to Roman Lorenz

Re: Ex Set 3 Question 3

by Julio Crego -
Note that the PVs from C30 to G30 are PVs at time 0, so we do not need to discount them further. However, the PV in H30 is at time 5 (because the first cash flow is at time 6; hence, we need to discount it. Check this link it may help as well.