Lacey Limited expected future cash flows from the use of plant as follows: End of Year 1 $14 000; End of Year 2 $15 000; End of Year 3 $12 000. The discount rate was determined as 9%. The value in use of the plant is:

Question

Quizplus · Accepted Answer

The formula for calculating the value in use of an asset is the sum of the expected future cash flows discounted to their present value. Using a discount rate of 9%, we can calculate as follows:

Year 1: $14,000 / (1 + 0.09)^1 = $12,844.04
Year 2: $15,000 / (1 + 0.09)^2 = $11,824.21
Year 3: $12,000 / (1 + 0.09)^3 = $9,261.71

Therefore, the total value in use of the plant is $34,735.96. Choice B is the correct answer.

Lacey Limited Expected Future Cash Flows from the Use of Plant