DataStream has just commenced operations under ideal conditions of uncertainty. Its cash flows will depend crucially on the state of the economy. On January $1,2024,$ the company acquired plant and equipment that will last two years, with zero salvage value. DataStream financed the plant and equipment purchase by issuing common shares. In $2024,$ net cash flows will be $$900$ if the state of the economy is good and $$600$ if it is poor. In $2025,$ cash flows will rise to $$1,200$ if the economy is good and remain at $$600$ if it is bad. Cash flows are received at year$-$end. In each year, the probability that the economy is good is $0\mathrm{.}6.$ The interest rate in the economy is $10\%$ in both years. DataStream did NOT pay any dividend in the two years.

Required $($Round the results to the nearest whole dollar$)$

a$.$ How much did DataStream pay for its plant and equipment on January $1,2024?$ Show calculations.

b$.$ In both $2024$ and $2025,$ the economy is good. Prepare a balance sheet at the end of $2025$ and an income statement for $2025.$

c$.$ What is amount of the accretion of discount $($to as ex ante, or expected net income$),$ at time $0?$Question $1$

DataStream has just commenced operations under ideal conditions of

uncertainty. Its cash flows will depend crucially on the state of the

economy. On January $1,2024,$ the company acquired plant and equipment

that will last two years, with zero salvage value. DataStream financed the

plant and equipment purchase by issuing common shares. In $2024,$ net

cash flows will be $$900$ if the state of the economy is good and $$600$ if it

is poor. In $2025,$ cash flows will rise to $$1,200$ if the economy is good and

remain at $$600$ if it is bad. Cash flows are received at year$-$end. In each

year, the probability that the economy is good is $0\mathrm{.}6.$ The interest rate in

the economy is $10\%$ in both years. DataStream did NOT pay any dividend

in the two years.

Required $($Round the results to the nearest whole dollar$)$

a$.$ How much did DataStream pay for its plant and equipment on January

$1,2024?$ Show calculations.

b$.$ In both $2024$ and $2025,$ the economy is good. Prepare a balance sheet at

the end of $2025$ and an income statement for $2025.$

c$.$ What is amount of the accretion of discount $($to as ex ante, or expected

net income$),$ at time $0?$