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

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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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.)
Transcribed Image Text: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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