Computing Expected Cash Outflows and Their Present Value Minerals Inc. anticipates environmental costs at the...
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Computing Expected Cash Outflows and Their Present Value
Minerals Inc. anticipates environmental costs at the end of a 10-year production cycle. Due to the uncertainties of the remedies available in 10 years, the company has developed the following estimates.
Cash Outflow
Probability
$200,000
30%
220,000
25%
240,000
25%
280,000
20%
In answering the following questions, round your answers to the nearest whole number, using no negative signs.
a.
Compute the expected cash outflow for the environmental costs.
b.
Determine the present value of the expected cash outflow assuming an interest rate of 5%.
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