KPop estimates their embossing machine will last another three years and will generate the following cash flows: Year 1 2 3
$ 5,000 $ 6,000 $ 6,500
Using a rate of 6% what would the equipment's value in use?

Question

Quizplus · Accepted Answer

The correct answer is A because the equipment's value in use is $15,514. This is calculated by taking the present value of the cash flows generated by the equipment over the next three years, using a discount rate of 6%. The present value of the cash flows is $15,514.

KPop Estimates Their Embossing Machine Will Last Another Three Years