Consider P Ltd a oneasset firm with no liabilities Assume th

Consider P. Ltd, a one-asset firm with no liabilities. Assume that the asset will generate end-of-year cash flows of $200 each year for two years and then will have zero value. The interest rate in the economy is 10% What is the net income for the second year?

18.18

38.18

34.18

9.18

Solution

Answer

18.18

cash flow = 200 * 0.9091 = 181.82

income statement = 181.82 * 10 % = 18.18