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!
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