Exercise 13-12 Uncertain Cash Flows [LO13-4] The Cambro Foundation, a nonprofit

Question

Exercise 13-12 Uncertain Cash Flows [LO13-4] The Cambro Foundation, a nonprofit organization, is planning to invest $152,837 in a project that will last for three years. The project will produce net cash inflows as follows: Year 1 Year 2 Year 3 $59,000 $65,000 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 9% rate of return, what is the expected net cash inflow for Year 3? et cash inflow

Explanation / Answer

Expected cash flow in year 3 = 56,979.93 Year Discount rate at 9% Amount Present Value                                                                                     1.00                        0.9174                  59,000.00                       54,126.60                                                                                     2.00                        0.8417                  65,000.00                       54,710.50                                                                                     3.00                        0.7722 x .7722x 108,837.10 +.7722x 108,837.10 +.7722x = 152,837 .7722x = 43,999.90 x = 56,979.93

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