Computing Expected Cash Outflows and Their Present Value

Minerals Inc. anticipates environmental costs at the end of a 10-year production cycle. Due to the uncertainties of the remedies available in 10 years, the company has developed the following estimates.

Cash Outflow	Probability
$200,000	30%
220,000	25%
240,000	25%
280,000	20%

In answering the following questions, round your answers to the nearest whole number, using no negative signs.

a.	Compute the expected cash outflow for the environmental costs.
b.	Determine the present value of the expected cash outflow assuming an interest rate of 5%.