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Expected Cash Flow and Probability Distribution

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Project with a 3 year life has the following probability distibutions for possible end of year cash flows in each of the next 3 years.

Year 1 Year 2 Year 3

Prob Cash flow Prob Cash flow Prob Cash flow
.30 $300 .15 $100 .25 $200
.40 $500 .35 $200 .75 $800
.30 $700 .36 $600
.15 $900

Using a interest rate of 8% find the expected present value of these uncertain cash flows.

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Solution Summary

Excel file contains calculation of expected present value of uncertain cash flow.

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Year 1 Year 1 Year 1
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3 550
4 ?
5 750
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