contestada

BBC Company hopes to buy new computers in two years and wishes to set aside money today for the purchase. BBC's Controller has developed the following estimates: Estimated Cash Outflows Probability Assessment $12,700 30% $13,300 50% $14,500 20% How much should BBC deposit today in an account earning 5% compounded annually, to have sufficient cash on hand to pay for the computers

Respuesta :

Answer:

$12,117.91  

Explanation:

The first task is to determine the cash flow amount that would be required in 2 years time by determining the expected  value of estimated cash outflows which is the sum of the estimated cash flows multiplied by their respsective probabilities as shown thus:

expected value in 2 years=($12,700*30%)+($13,300*50%)+( $14,500*20%)

expected value in 2 years=$13,360.00  

Using the present value formula below, we can calculate the amount to be invested today:

PV=FV/(1+r)^n

PV=the amount to be invested today=the unknown

FV=future value=FV=the amount of cash outflow required in 2 years=$13,360.00  

r=rate of interest=5%

n=the length of time that the amount would invested=2 years

PV=$13,360.00/(1+5%)^2

PV=$12,117.91  

Otras preguntas