The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows when using present values for accounting measurements.Assume that the Smith Company determined that it has a 40% probability of receiving $10, 000 in one year but a 60% probability of receiving $10, 000 two years from now.
Required:
Using the FASB concepts, calculate the present value of the cash flows assuming a 12% interest rate compounded annually.
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