Final answer:
To calculate cash received on sale, determine the present discounted value of future profits using the provided formula and a 15% interest rate, sum these values, then divide by the number of shares to obtain price per share.
Step-by-step explanation:
Calculating the cash received on sale in the context of an investment section on a Statement of Cash Flows (SOCF) involves determining the present discounted value (PDV) of future profits. This calculation is performed by discounting future cash flows back to their present value using a specific interest rate, in this instance, 15%. To find out the PDV, we apply the formula provided in Table C1 for each benefit to be received at different time periods.
After calculating the PDV for each time period, these values are summed to determine the final present value of all future profits. Given an example where the PDV of total profits is 51.3 million and the number of shares is 200, we would divide 51.3 million by 200 to find the price per share, which wo
uld be approximately $256,500
per share. Remember, in practice, expected profits are estimations and the chosen discount rate significantly impacts the calculated PDV.