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Ie, doesn’t FCF * (1+g) / (r-g) = present value of terminal value, as of 1 year after the terminal period.
So, if you’ve got a 5 yr dcf, and you’re using midyear convention and a 12/31/08 valuation date:
Year 1 period = .5
Year 2 = 1.5
Year 3 = 2.5
Year 4 = 3.5
Year 5 = 4.5
Terminal value = 5.0
Wouldn’t the perpetuity growth rate formula deliver value as of period 5.5, rather than as of 5.0? Read More