Grimaldo expects a single cash receipt of 11,466 from using a piece of equipment, of which only the date is uncertain: in one year (probability 40 %) or in two years (probability 60 %). The applicable discount rates are 4 % per year for a one-year maturity and 5 % per year for a two-year maturity. Compute the expected present value of this receipt under the expected cash flow approach.
- Amount of the receipt
- 11,466
- Probability of receipt in one year
- 40 %
- Probability of receipt in two years
- 60 %
- Annual rate for a one-year maturity
- 4 %
- Annual rate for a two-year maturity
- 5 %