What is the present value of expected cash flows

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Reference no: EM133003974

Hood Company has several minor lawsuits outstanding. To determine the amount of liability to recognize on the statement of financial position, Picnic decides to use expected cash flow techniques.

Based on discussions with their lawyers, Picnic has developed the following cash flow estimates, and related probabilities:

Year                  Cash Flow Estimate                   Probability Assessment

2021                       $1,200                                   15%
                             $4,500                                   40%
                             $6,500                                    45%

2022                       $2,500                                   20%
                              $4,000                                  45%
                              $5,500                                   35%

Instructions

Problem 1: Based on these estimates, and assuming a risk-free rate of 4%, what is the present value of expected cash flows that Picnic should record on their statement of financial position for 2020?

Reference no: EM133003974

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