Build- It- Big Company estimates two scenarios of possible future notes receivable un-collectibles and the probability of each not being collected in the next year. The risk- free rate is 5%. For each of the scenarios, compute the expected cash flow value based on the probabilities given. Compare the expected cash flows on each case.

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Scenario 1 Sconario 2 Estimated Loss Probability 20% 75% 5% Estimated Loss S 45,000 130,000 1,250,000 Probability 5% 75% 20% $ 45,000 130,000 1250,000