Discount Perpetuities - Constantly growing CF

Hey guys,

I am taking my first steps in valuation and have problems with the solutions to 2 questions.
Both questions described constantly growing cash flows in the future, which I had to discount to the present value. However, they were discounted differently by including the g (growth rate) in different ways:

Solutions to question 1:
CF*(1+g) / (r-g)

Solutions to question 2:
CF / r-g

Do you see the difference? The cash flow is constantly increased in solution 1 while the growth is also reflected in the discount rate. In solution 2, the growth is only reflected in the discount rate.

Can you help me? When do I use what? For my understanding, the growth of the cashflow is already reflected in the denominator and is not required in the numerator..

Best regards and thank you!

 

Et consectetur rerum similique incidunt repudiandae est error. Animi aut dolore eum amet nostrum. Et nulla commodi eaque ut.

Career Advancement Opportunities

April 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. New 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

April 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

April 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

April 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (87) $260
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”