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Simpson Inc. has a cash flow of $750,000 to be received during the next three years,...

Simpson Inc. has a cash flow of $750,000 to be received during the next three years, 2018, 2019 and 2020 with probabilities of 40%, 50%, and 10%, respectively. The rate of interest on default risk-free investments is 9%. Required: What is the expected present value of Simpson's cash flow? If applicable, round your answers to the nearest whole dollar.

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Answer #1
Expected Present Value of Simphon's Cash flows :
Year Cash flow Probability Cash flow * Probability Present value factor @ 9% Expected Present value
2018 750000 40% 300000 0.9174 275229.36
2019 750000 50% 375000 0.8417 315630.00
2020 750000 10% 75000 0.7722 57913.76
648773.12
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