Candy Limited expected future cash flows from the use of Equipment as follows: End of Year 1 $4000; End of Year 2 $5000; 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

Quizplus · Accepted Answer

The value in use is calculated by discounting the future cash flows to their present value using the discount rate. The calculation 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