Example 2.20

Consider a share that will pay dividends at the end of each year with a dividend of R5 due in one year's time. The dividends are expected to increase by 3%p.a.(after the dividend due in a year) and the share price is expected to be R113 In 10 years time. You want to buy the share now. How much would you pay for the share using an interest rate of 16% p.a.... the price in the solution includes 113v^10@ 16%.... I had thought that the 113 would be discounted for 10 years @16% and compared to the present value of the equity to determine how much I should be willing to pay. I dont understand why 113v^10 is a part of the present value.