Candy Limited expected future cash flows from the use of Equipment as follows:
$\bullet$End of Year 1 £4000;
$\bullet$End of Year 2 £5000;
$\bullet$End of Year 3 £2000.
The discount rate was determined as 5%. The value in use of the equipment is:
A) £10 073;
B) £10 576;
C) £11 000;
D) £11 550.

Question

Candy Limited expected future cash flows from the use of Equipment as follows: 
$\bullet$End of Year 1 £4000;
$\bullet$End of Year 2 £5000;
$\bullet$End of Year 3 £2000.
The discount rate was determined as 5%. The value in use of the equipment is:
A) £10 073;
B) £10 576;
C) £11 000;
D) £11 550.

Quizplus · Accepted Answer

The value in use is calculated by discounting the future cash flows at the given discount rate. The present value of cash flows is: £4000/(1.05)^1 + £5000/(1.05)^2 + £2000/(1.05)^3 = £10,073.

Candy Limited Expected Future Cash Flows from the Use of Equipment