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Expected Cash Flows and Present Valu mount to set aside so that she will have enou

Expected Cash Flows and Present Valu mount to set aside so that she will have enou

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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E6.21 (LO 5) (Expected Cash Flows and Present Value) Angela Contreras is trying to determine the amount to set aside so that she will have enough money on hand in 2 years to overhaul the engine on her vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some research online, Angela has developed the following estimates. Engine Overhaul Estimated Cash Outflow Probability Assessment $200 10% 450 30% 600 50% 750 10% Instructions How much should Angela Contreras deposit today in an account earning 6%, compounded annually, so that she will have enough money on hand in 2 years to pay for the overhaul?
Transcribed Image Text:E6.21 (LO 5) (Expected Cash Flows and Present Value) Angela Contreras is trying to determine the amount to set aside so that she will have enough money on hand in 2 years to overhaul the engine on her vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some research online, Angela has developed the following estimates. Engine Overhaul Estimated Cash Outflow Probability Assessment $200 10% 450 30% 600 50% 750 10% Instructions How much should Angela Contreras deposit today in an account earning 6%, compounded annually, so that she will have enough money on hand in 2 years to pay for the overhaul?
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