Reading 34, EOC #15

CFA Level II Equities
#1

Hey Guys,

The answer key explains that the return on intangibles is $28.8mm, which I understand.

But then when they calculate the value of intangibles, the formula they use is:

(Return on Intangibles)/(Req. Return on Intangibles - Future Growth Rate)

I was expecting (Return on Intangibles)(1+g)/(r-g) as per the CCM model. This is how the value of intangibles was calculated in EOC #4…so…what gives?

#2

depends on the time line. if they said return on intangibles is next year’s return - you would not do *(1+g) in that case.