Mathias Company Estimated That It Has a 20% Probability of Receiving

question 15

Essay

Mathias Company estimated that it has a 20% probability of receiving $240,000 one year from now, a 30% probability of receiving $240,000 two years from now, and a 50% probability of receiving $240,000 three years from now.
Required:
Using the FASB's concept of "expected cash flows," calculate the present value of the expected cash flows assuming a 10% interest rate compounded annually.

---

Definitions:

Guaranteed Payment

Payments made to partners in a partnership regardless of the partnership's income, ensuring the partner receives a steady income.

Partnership Interest

A partnership interest is the share or portion of a partnership owned by one of the partners, encompassing the rights to the profits, losses, and assets associated with the partnership.

Computers

Computers are electronic devices designed to execute operations and process data according to a set of instructions, used in a wide range of applications from personal to business.

Equipment

Tangible personal property used in operations, which may be considered a business asset and subject to depreciation for tax purposes.