The Cambro Foundation, a nonprofit organization, is planning to invest $219,125 in a project that will...
The Cambro Foundation, a nonprofit organization, is planning to invest $219,125 in a project that will last for three years. The project will produce net cash inflows as follows:
Year 1 $ 76,000
Year 2 $ 88,000
Year 3 ?
Required: Assuming that the project will yield exactly a 10% rate of return, what is the expected net cash inflow for Year 3?
Homework Answers
The present value of the net cash inflows for the three years is $219,215.
Assuming the net cash inflows for year 3 to be ‘X’,
$219,215 = ($76,000 x 0.90909) + ($88,000 x 0.82645) + ($X x 0.75132)
$219,215 = $69,090.84 + $72,727.60 + $0.75132X
$219,215 = $141,818.44 + $0.75132X
$0.75132X = $77396.56
X = $77396.56/$0.75132 = 103014.11
Net cash inflows in Year 3 = $103014.11
Note: In the absence of specific instructions regarding rounding off, amounts have been rounded off to 2 decimal places. Kindly round off as required.
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