Question

when we calculate a portfolio's k is lesser than g, how do we assume the k or g in the futrue?

Answer 1

The perpetual growth rate 'g' in the future is to be assumed as the nominal world GDP growth rate. A perpetual growth rate assumed to be larger than the world GDP growth rate would imply that the portfolio would in perpetuity become larger than the global GDP (which cannot be possible). Conclusion: Assume the perpetual growth rate to be equivalent to the global GDP growth rate (currently, assumed to be 3.5% - 4.0%(

Answer 2

theoretical it can´t be possible that g is higher than k, because the interest rates are higher than the inflation or the gdp growth the central banks always increases the rates in order to cotrol inflation and rememeber that in a econmy when their gdp increases in inflation goes behind