solution
solution.
As part of a net present value calculation, a company has estimated the following: Cash flow in one year is 10
million with a probability of 40% and 7 million with a probability of 60%. If cash flow becomes
10 million in one year, there is a 70% probability of cash flow of 12 million and 30%
probability of cash flow of 5 million in two years. If cash flow becomes 7 million in one
year, there is a 20% probability of cash flow of 9 million and an 80% probability of cash flow
of 2 million in two years. The required rate of return is 10%. What is the expected present value of the mentioned
the cash flows?
million with a probability of 40% and 7 million with a probability of 60%. If cash flow becomes
10 million in one year, there is a 70% probability of cash flow of 12 million and 30%
probability of cash flow of 5 million in two years. If cash flow becomes 7 million in one
year, there is a 20% probability of cash flow of 9 million and an 80% probability of cash flow
of 2 million in two years. The required rate of return is 10%. What is the expected present value of the mentioned
the cash flows?
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