Question

wr Chapter 2 & 3 Homework Assis X 5 NWP Assessment Player UI Ap X + assessment.education.wiley.com/was/ui/v2/assessment-player/index.html?launchid=57bd763b-24bf-4e5b-b7d1-5a9aacd40b69#/question/8 G 1 Homepage - Britis... @BCIT Computer Oxford Learner's... Canada Revenue Financial Manage... Canadian Securiti... SFMGT 3510 WP FMGT 3110 Other Bookmarks + Chapter 2 & 3 Homework Assignment Question 9 of 9 < -/1 = Wildhorse Concrete Ltd, own a cement manufacturing equipment and needs to determine the asset's value in use to test for impairment. Wildhorse's management estimates that the equipment will last for another four years and that it will generate the following future cash flows at the end of each year: Year 2 Year 1 $20,000 Year 3 $23,000 Year 4 $15.900 $18.000 Calculate the value in use in order to compare to the carrying value of the equipment. Value in use $ Calculate the present value of each of these future cash flows. Using a discount rate of 5%. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.) Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Present Value Year 1 $ Year 2 $ Year 3 $ Year 4 $

Answer 1

Value in use

Value in use is the Present Value of the future cash flows

Year	Annual cash flows ($)	Present Value Factor (PVF) at 5.00%	Present Value of annual cash flows ($) [Annual cash flow x PVF]
1	20,000	0.95238	19,047.60
2	18,000	0.90703	16,326.54
3	23,000	0.86384	19,868.32
4	15,900	0.82270	13,080.93
TOTAL		68,323.39

Hence, the Value in use will be $68,323.39

NOTE    

The Formula for calculating the Present Value Factor is [1/(1 + r)ⁿ], Where “r” is the Discount/Interest Rate and “n” is the number of years.