7.15 Phillips Industries runs a small manufacturing operation. For this year, it expects to have real net cash flows of $120,000. Phillips is an ongoing operation, but it expects competitive pressures to erode its (inflation-adjusted) net cash flows at 6 percent per year.

The appropriate real discount rate for Phillips is 11 percent. All net cash flows are received at year-end. What is the present value of the net cash flows from Phillips’s operations?