Been a while since I've thought of this stuff but anyway...
See attached sheet for an explanation of your example. You've left out the growth of free assets in your calculation which throws off your answer.
I've done this as if the valuation basis is set and we change it, so there's a release of reserves at time zero, but this could just be considered free assets and treated the same way, I've just included it explicitly in the calculation of EV.
Hopefully I'm actually right here (someone want to double check?). I certainly appear to be getting expected results (i.e. when the RDR is zero EV of both scenarios are the same)
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Last edited by a moderator: Dec 13, 2013