Now let's proceed with our formulas.

So for the most widely used case which is

the temporary supernormal growth

plus no growth,

we produce the formula and here I will rewrite

that because there are some widely accepted special terms.

Again, this is the sub zero.

I will just rewrite,

x sub zero, one minus t, one minus b.

Now, I will drop the index.

Because there will be no growth there,

so indexes S and C are no longer relevant here.

So I will just leave it here because b refers to the period of supernormal growth.

Now, comes the summation.

Again, g without an index plus k and all that to the t power.

And then comes the tail which is

x sub zero times one minus t divided by k and here,

one plus g to one plus k to the nth power.

So this is most

often called the first term in this formula,

and this the second term or like I said terminal value or tail.

Well, I will put some shortcut because when people see summations,

well clearly you can feed your computer.

But also this is the piece of geometric regression which is a finite piece and therefore,

there is some shortcut here.

Because this sum of t one to n of one plus g over one plus k to the t of power

is actually equal to one plus g divided by g minus k and here comes this one plus g over

one plus k to the nth power less

one and you can see in this formula that if because this is finite.

So here, g may be easily greater than k but if g is greater than k then this is positive.

And so, this is greater than one and so this brace is positive.

However, if g is less than k then this is negative.

But this is less than one and this is negatives.

So the negative multiple gives you a positive thing.

So let's try to use this formula to calculate some values on an example.

So the example goes like this.

Some value drivers, example

consist of three cases and some will drivers will stay the same.

So this is x sub zero will be 100 million dollars.

The tax rate will be 40 percent.

Again n the number of years of supernormal growth will be 4 for all cases,

k will be 10 percent for all cases.

But now I will put them in black b

and r these will be changing.

So k is one.

This is b point eight and r, 25 percent.

So the combination g,

which is br is 20 percent.

Well if we use the formula,

then we can say then the first term is equal to 60 million.

You can check that on the leisure and then

the second term