In: Finance
n a footnote on its 2019 annual report Hewlett Packard reported the following operating lease obligations (in $ millions): Year Amount 2020 9,087 2021 8,498 2022 7,460 2023 4,514 2024 3,306 Calculate the present value of the future operating lease obligations, assuming a discount rate of 12%.
operating lease obligations (in $ millions): Year Amount 2020 9,087 2021 8,498 2022 7,460 2023 4,514 2024 3,306 Calculate the present value of the future operating lease obligations, assuming a discount rate of 12%.
Here 0th year ( present year ) = 2019
Calculate the present value on 2019
every future value is discounted using 12% to 2019. current period (present period)
PV = amount * ( 1 / 1 + r )^n
Year |
Cash flow (fv) |
PV of $1 factor @discounted using 12% |
PV of CF |
2020 |
9087 |
(1 / 1 + 11%)^1 = 0.9009 |
8186.47 |
2021 |
8498 |
(1 / 1 + 11%)^1 =0.81162 |
6897.15 |
2022 |
7460 |
(1 / 1 + 10.1%)^1 =0.7312 |
5454.75 |
2023 |
4514 |
(1 / 1 + 11%)^1 =0.6587 |
2973.37 |
2024 |
3306 |
(1 / 1 + 11%)^1 =0.5935 |
1962 |
Total PV of future cash flow = 25474 million
present value on 2019, the future operating lease obligations = $ 25474 million