Question
The Present Value Interest Factor of an Annuity function, PVIF (k, n) is used to discount future amounts to their present value. The equation inside
The Present Value Interest Factor of an Annuity function, PVIF (k, n) is used to discount future amounts to their present value. The equation inside the function is: PVIF (k, n) = 1 / (1+k) n Where k is the discount rate, in this case WACC, and n is the number of periods of discounting. This discount factor is multiplied times an FCF forecast to get the present value. Suppose Sally Co has a WACC of 15%. Find the present value of the future FCFs and terminal value and sum them to get the DCF value of Sally Co. Please compute each years PVIF (15%, i) to four decimal places. Then sum up the present values of the cash flows to get Sally Cos DCF Value.
Year i | FCFi | PVIF (15%, i) | PVIF (15%, i) x FCFi |
1 | $12M |
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2 | $15M |
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3 | $18M |
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4 | $22M |
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5 | $26M |
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|
6 Terminal Year |
$260M |
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| DCF Value = |
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