Assume the cash flows arising from a project are the only potential source of cash flow...

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Assume the cash flows arising from a project are the only potential source of cash flow for a company and the company currently owes £0.7 million debt at an interest rate of 15% per annum. In one year's time, the project will either yield a cash inflow of £1.4 million with a probability of 30% or a cash inflow of £3.5 million with a probability of 70%. In one year's time, the company will be closed and the proceeds distributed to shareholders. What is the expected cash inflow for shareholders in one year's time? Assume the cash flows arising from a project are the only potential source of cash flow for a company and the company currently owes £0.7 million debt at an interest rate of 15% per annum. In one year's time, the project will either yield a cash inflow of £1.4 million with a probability of 30% or a cash inflow of £3.5 million with a probability of 70%. In one year's time, the company will be closed and the proceeds distributed to shareholders. What is the expected cash inflow for shareholders in one year's time?

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Calculate the expected cash inflow for shareholders in one years time Lets denote the cash inflo... View the full answer