Question

The Cambro Foundation, a nonprofit organization, is planning to invest $173,950 in a project that will last for three years. The project will produce net cash inflows as follows: $ $ 52.000 80.000 Year Click here to view Exhibit 88.1 and Exhibit 8B-2. to determine the appropriate discount factor(s) using table. 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 Cashflow References Book & Resources Worksheet culty

Answer 1

Net cash flow of Year 3 = $77,000

Working

The net present value of the project will be 0 on 12%. that means the present value of cash flow should be equal to initial investment.

The year 3 cash flow will be balancing figure to calculate the answer as follows.

Year	Cash flow	PV factor	Present value
1	$         62,000	0.893	$            55,366
2	$         80,000	0.797	$            63,760
3	$         77,000	0.712	$            54,824
Total present value of cash flows			$          173,950
Less: Initial Investment			$          173,950
Net Present value			$                     -