The Cambro Foundation, a nonprofit organization, is planning to invest $159,040

Question

The Cambro Foundation, a nonprofit organization, is planning to invest $159,040 in a project that will last for three years. The project will produce net cash inflows as follows:

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table.

   
Required:

Assuming that the project will yield exactly a 7% rate of return, what is the expected net cash inflow for Year 3? (Round discount factor(s) to 3 decimal places.)

Present value of year 3 cash inflow/Present value factor= Cash Inflow

The Cambro Foundation, a nonprofit organization, is planning to invest $159,040 in a project that will last for three years. The project will produce net cash inflows as follows:

Explanation / Answer

Answer:

Present value of inflows should be equals to Initial Outflow

So, 159040 = 50000*1/1.07 + 66000* (1/1.07)^2 + X *(1/1.07)^3

159040 = 46728.97 + 57646.96+ x0.816

159040-104375.93 = 0.816*X

So, 54664.07 = 0.816*X

So, X = 54664.07 /0.816 =$66990.28

Thanks

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