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    Expected present value

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    The followings are the forecasted financial information on ABC Company:

    Year : 0 / 1 / 2 / 3 / 4 to n

    Accounting profit (millions) : 0.9 / 0.9 / 0.9 / 0.9 / 0.96

    Net cash flow (millions) : -5.8 / 0.7 / 2.1 / 3.8 / 0.58

    Without doing any calculation, any mistakes(s) made in the following calculation:

    << The current deposit interest rate offered by banks is about 3% annually, the present value of business :

    = -5.8 + 0.7/(1+3%)^1 + 2.1/(1+3%)^2 + 3.8/(1+3%)^3 + 0.58/(1+3%)^4
    = total expected present value >>.

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    https://brainmass.com/business/capital-budgeting/error-expected-present-value-132482

    Solution Preview

    The cash flows should be discounted at a rate that reflects the risk of the cash flows.
    The discount rate used in the ...

    Solution Summary

    The solution spots error in expected present value calculations.

    $2.19

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