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When calculating the present value of future cash flows( hundred years) from an investment for example WACC of 15.2%
Do we divide it by the market value of a share to calculate the net present value of future dividends from a stock?The MV per share is equal to the present value of the future dividends. However this is not relevant when calculating the NPV of a project because the WACC is the overall cost of borrowing from both equity and from debt.
If you are asked for the PV for future cash flows discounting at 15.2% then you need to calculate the discount factor using the formula (because the tables do not include 100 years or an interest rate of 15.2%). However this would be very unusual for Paper FM – almost always questions are on figures that are in the tables. Using the formula is examined in Paper MA.
I do suggest that you watch my free lectures on all of this. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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