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n a footnote on its 2019 annual report Hewlett Packard reported the following operating lease obligations...

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%.

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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

jeff jeffy answered 3 years ago
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