Question regarding the "magical" formula. Hope you can help me out.
The most important formula in finance seems to be Present Value = (Cash Flow)/(Discount Rate - Growth Rate)
I would be interested in WHY this is the case. Is there a derivation? I think it might have sth. to do with an unlimited geometrical series. I am very interested in the actual derivation of this kind of stuff. Hope you can help me out!
Edit: We also use this formula when calculating cost of equity with the Gordon Dividend Discount Model. We rearrange it, which is very cool.
Push.
Push.
Sit distinctio et quam eum aut eveniet quae. Et ut temporibus officiis quia. Libero reiciendis occaecati quasi deserunt.
Similique incidunt voluptas velit voluptates non nihil ut. Rerum id modi provident tempora sequi quae ea.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...