Kk143. At the end of 2020, Nash Company is conducting an impairment test and needs to develop a fair value estimate for machinery used inits manufacturing operations. Given the nature of Nash's production process, the equipment is for special use. (No secondhand marketvalues are available.) The equipment will be obsolete in 2 years, and Nash's accountants have developed the following cash flowinformation for the equipment.Year202120222022Net Cash FlowEstimate$5,7108,920$(470)2,0003,980Scrap value$490870ProbabilityAssessmentClick here to view factor tables40%60%20%60%20%50%50%Using expected cash flow and present value techniques, determine the fair value of the machinery at the end of 2020. Use a 5%discount rate. Assume all cash flows occur at the end of the year. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer toO decimal places, e.g. 458,581.)

To calculate the fair value of the machinery with cashflow using the present value techniques , the…

Answered: lable.) The equipment will be obsolete…

lable.) The equipment will be obsolete in 2 years, and Nash's accountants have developed the following the equipment. Cash Flow Probability

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Kk143.

At the end of 2020, Nash Company is conducting an impairment test and needs to develop a fair value estimate for machinery used in
its manufacturing operations. Given the nature of Nash's production process, the equipment is for special use. (No secondhand market
values are available.) The equipment will be obsolete in 2 years, and Nash's accountants have developed the following cash flow
information for the equipment.
Year
2021
2022
2022
Net Cash Flow
Estimate
$5,710
8,920
$(470)
2,000
3,980
Scrap value
$490
870
Probability
Assessment
Click here to view factor tables
40%
60%
20%
60%
20%
50%
50%
Using expected cash flow and present value techniques, determine the fair value of the machinery at the end of 2020. Use a 5%
discount rate. Assume all cash flows occur at the end of the year. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to
O decimal places, e.g. 458,581.)

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