Question

On December 31, 2050, General Industries Corp. (GIC) has just established two joint

Answer 1

The combined value available to GIC in terms of the present value as of

December 2050 is $5,050,413.22

What are year 1 cash flows to GIC?

GIC is entitled to 50% of the cash inflows of the joint venture both in UK and South Korea in years 1 and 2

Annual cash flow=(1,000,000*1.02*50%)+(6,000,000,000/1250*50%)

Annual cash flow=$2,910,000

Now the present value of years 1 and 2 cash flows can be determined using the present value formula of a single cash flow provided below:

PV=FV/(1+r)^N

PV=present value=unknown

FV=future cash flows in years 1 and 2

r=discount rate=10%

N=years of cash flow,1 for year and 2 for year 2

PV=2,910,000/(1+10%)^1+2,910,000/(1+10%)^2

PV=$5,050,413.22

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