1. 300 points value: The Cambro Foundation, a nonprofit organization, is plannin

Question

1. 300 points value: The Cambro Foundation, a nonprofit organization, is planning to invest $104,950 in a project that will last for three years. The project will produce net cash inflows as follows: Year 1 Year 2 Year 3 $30,000 40,000 Click here to view Exhibit 13B-1 and Exhibit 138-2, to determine the appropriate discount factor(s) using Required: Assuming that the project will yield exactly a 12% rate of return, what is the expected net cash inflow for Year 3? (Round discount factor(s) to 3 decimal places.) Net Cash Inflow

Explanation / Answer

The correct answer is 65000

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If we discount all the cash inflow with 12%, PV of the inflows will be equal to project initial cash outflow.

Initial investment = PV of year 1 inflow + PV of year 2 inflow + PV of year 3 inflow

104950 = 30000/(1+.12) + 40000/(1+.12)2 + X/(1+.12)3

104950 = 30000/1.12 + 40000/1.254 + X/1.405

104950 = 26785.714 + 31897.927 + X/1.405

104950 = 58673.4694 + X/1.4049

X/1.4049 = 104950 – 58683.641

X = 46266.359 * 1.4049

X = $64999.6 or 65000

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