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What is the present value of the expected future cash flow

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On January 1, 2015, Nickel Company loaned Copper Company amounting to P2,000,000 and received a two-year, 6%, P2,000,000 note. The note calls for annual interest to be paid each December 31. Nickel collected the 2015 interest on schedule. However, on December 31, 2016, based on the Copper's recent financial difficulties, Nickel expects that the 2016 interest, which was recorded in the books, will not be collected and that only P1,200,000 of the principal will be recovered. The P1,200,000 principal amount is expected to be collected in two equal installments on December 31, 2018 and December 31, 2020. The prevailing interest rate for similar type of note as of December 31, 2016 is 8%, December 31, 2017 is 9%, December 31, 2018 is 10%, December 31, 2019 is 7%, and December 31, 2020 is 9%.

problem 1: What is the present value of the expected future cash flow as of december 31,2016?

 

Reference no: EM132784241

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