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Forte Company estimates two scenarios of possible future notes receivable uncollectibles and the probability of each not being collected in the next year. The
Forte Company estimates two scenarios of possible future notes receivable uncollectibles and the probability of each not being collected in the next year. The risk-free rate is 4%. (Click the icon to view the scenarios.) (Click the icon to view the Future Value of $1 table.) (Click the icon to view the Present Value of $1 table.) (Click the icon to view the Future Value of an Ordinary Annuity table.) (Click the icon to view the Future Value of an Annuity Due table.) (Click the icon to view the Present Value of an Ordinary Annuity table.) (Click the icon to view the Present Value of an Annuity Due table.) Requirement For each of the scenarios, compute the expected cash flow value based on the probabilities given. Compare the expected cash flows on each case. Estimated Loss Scenario 1: Probability of Scenario 2: Loss Occurring Expected Cash Flow Loss Estimated Probability of Expected Cash 55,000 20% 11,000 $ Loss 55,000 Loss Occurring Flow Loss 5% $ 2,750 165,000 1,500,000 75% 5% 123,750 165,000 75% 123,750 75,000 1,500,000 20% 300,000 $ 209,750 $ 426,500 Total expected cash flow loss - Scenario 1 Total expected cash flow loss - Scenario 2 Now compute the present value of the expected cash flows for each scenario. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculations. If using future and present value tables or the formula method, use factor amounts rounded to five decimal places, X.XXXXX. Round all calculations and your final answer to the nearest cent, $X.XX.) Scenario 1 Scenario 2 Present Value
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