04-16-2010, 04:35 PM
Dear,
the formula which Mr. Amir used is the methematically derived form of present value formula.
If I start with the formula you used I will derive the formula which Mr. Amir used.
S=P*(1+i)^n
S/P=(1+i)^n
multiply both sides by power 1/n.
(S/P)^1/n = {(1+i)^<font color="red">n</font id="red">*1/<font color="red">n</font id="red">}
now the "n" will be cancelled out and,
(S/P)^1/n = (1+i)^1
now power 1 means same base, hence;
(S/P)^1/n = (1+i)
{(S/P)^1/n} - 1 = i.
hence,
{(Dn/Do)^1/n - 1} = i(which is growth rate)
Regards,
the formula which Mr. Amir used is the methematically derived form of present value formula.
If I start with the formula you used I will derive the formula which Mr. Amir used.
S=P*(1+i)^n
S/P=(1+i)^n
multiply both sides by power 1/n.
(S/P)^1/n = {(1+i)^<font color="red">n</font id="red">*1/<font color="red">n</font id="red">}
now the "n" will be cancelled out and,
(S/P)^1/n = (1+i)^1
now power 1 means same base, hence;
(S/P)^1/n = (1+i)
{(S/P)^1/n} - 1 = i.
hence,
{(Dn/Do)^1/n - 1} = i(which is growth rate)
Regards,