Based on the cashflows in the previous years and the present value, the cash flows to equity investors at the end of year should be $3,275,800.
<h3>What should be the cashflow at the end of year 3?</h3><h3 />
The cashflow at the end of year 3 should have a present value that when added to the present value of the cashflows in years 1 and 2, will equal the present value of the investment of $2,600,000.
That amount is:
2,600,000 = (80,000 / ( 1 + 10%)) + (80,000 / ( 1 + 10%)²) +( Amount / ( 1 + 10%)³)
2,600,000 = 138,842.9752 + ( Amount / ( 1 + 10%)³)
( Amount / ( 1 + 10%)³) = 2,600,000 - 138,842.9752
Amount = 2,461,157.0248 x 1.1³
= $3,275,800
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