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An investment is expected to produce cash flows for 10 years. There is a 15% probability the flows will be $1,000 per year, a 60%
An investment is expected to produce cash flows for 10 years. There is a 15% probability the flows will be $1,000 per year, a 60% probability they will be $1,500 per year and a 25% probability they will be $1,900 per year.
A. Calculate the expected cash flow.
B. If the interest rate is 8% annually and the flows are expected to occur at the end of each period, find the present value of this investment.
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