Question

How do you find the PV of OFCF for each year from 1 to 4 using WACC after tax, if year 1 OFCF is 4496, year 2 is 3510, year 3 is 475, year 4 is 1646 and WACC after tax is 0.0427623

Answer 1

Formulas and knowledge required

PV: Present Value

OFCF: Operating Future Cash Flows

PV of OFCF = Summartion of (OFCF* Present Value factor)

Present value Factor = 1/(1 + r)^t ,

Where,

t is time,

r is discount rate, which is WACC in our case i.e. 0.0427623

Answer:

PV of OFCF of year 1 = 4496/(1.0427623)¹ = 4311.62

PV of OFCF of year 2 = 3510/(1.0427623)² = 3228.02

PV of OFCF of year 3 = 475/(1.0427623)³ = 418.93

PV of OFCF of year 4 = 1646/(1.0427623)⁴ = 1392.16

PV of all years OFCFs = 4311.62 + 3228.02+ 418.93+ 1392.16

= 9350.73