Question

The Cambro Foundation, a nonprofit organization, is planning to invest $219,125 in a project that will last for three years. The project will produce net cash inflows as follows:
Year 1 $ 76,000
Year 2 $ 88,000
Year 3 ?

Assuming that the project will yield exactly a 10% rate of return, what is the expected net cash inflow for Year 3?

Answer 1

The expected net cash inflow for Year 3 is $98,950

Explanation:

The expected net cash inflow for Year 3 is

= (Initial investment + I Year return + II Year return) - (I year cash inflows +   II year cash inflows)

= ($219,125 +  $21,912.5 + $21,912.5) - (  $76,000 + $88,000) = $98,950

$= ( 219,125 + 21,912.5 + 21,912.5) - ( 76,000 + 88,000) = 98,950$

The expected net cash inflow for Year 3 is $98,950