Question

What guidance does IFRS 13 provide about the cash flow estimates and discount rate when valuing a specific asset, like production equipment?

Answer #1

The appropriate
discount rate for the following cash flows is 13 percent compounded
quarterly.
Year
Cash Flow
1
$600
2
900
3
0
4
1,200
What is the
present value of the cash flows?

TB Problem Qu. 13-171 Devon Corporation uses a discount...
Devon Corporation uses a discount rate of 8% in its capital
budgeting. Partial analysis of an investment in automated equipment
with a useful life of 8 years has thus far yielded a net present
value of −$498,941. This analysis did not include any estimates of
the intangible benefits of automating this process nor did it
include any estimate of the salvage value of the equipment. (Ignore
income taxes.)
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For the following set of cash flows, year,0,1,2,3,cash
flow,-8,000,6,700,6,800,6,100(a) what is the NPV at a discount rate
of 0 percent?(b) what is the NPV at a discount rate of 12 percent?
(C) what is the NPV at a discount rate of 18 percent? (D) what is
the NPV at a discount rate of 23 percent?

What is the present value of the following cash flow stream at a
discount rate of 7%? $0 in year 0 $1,000 at the end of year 1
$2,500 at the end of year 2 $3,500 at the end of year 3 $4,250 at
the end of year 4 $2,500 at the end of year 5

Profitability index.Given the discount rate and
the future cash flow of each project listed in the following
table, use the PI to determine which projects the company should
accept.
Cash Flow
Project A
Project B
Year 0
−$2,000,000
−$2,600,000
Year 1
$400,000
$1,300,000
Year 2
$550,000
$1,150,000
Year 3
$700,000
$1,000,000
Year 4
$850,000
$850,000
Year 5
$1,000,000
$700,000
Discount rate
6%
14%
What is the PI of project A?

Profitability index. Given the discount rate and the future cash
flow of each project listed in the following table, use the PI to
determine which projects the company should accept.
What is the PI of project A?
What is the PI of Project B?
Cash Flow
Project A
Project B
Year 0
−$2,000,000
−$2,300,000
Year 1
$600,000
$1,150,000
Year 2
$700,000
$1,050,000
Year 3
$800,000
$950,000
Year 4
$900,000
$850,000
Year 5
$1,000,000
$750,000
Discount rate
5%
16%

A. Find the present values of the following cash flow streams at
a 9% discount rate. Round your answers to the nearest cent.
Stream A
$0
$100
$350
$350
$350
$300
Stream B
$0
$300
$350
$350
$350
$100
Stream A $
Stream B $
B. What are the PVs of the streams at a 0% discount rate?
Stream A $
Stream B $

10. What is the future value of the following cash flows if the
discount rate is 8%? What is the future value if the discount rate
is 5%? (Future value at year 4).
Cash Flow
Year 1 $12,000
Year 2 $1,000
Year 3 $2,000
Year 4 $5,500

A cash flow stream has the following with a discount rate of
7.56%.
Years: 0 1 2 3 CFs:
0: $452 1: $3,276 2: $2,973 3: $5,298
What is the present value?

Different cash
flow.
Given the cash inflow in the following table,
LOADING...
, what is the present value of this cash flow at
5%,
13%,
and
24%
discount
rates?
What is the present value of this cash flow at
5%
discount rate?
(Round to the nearest cent.)What is the present value of this
cash flow at
13%
discount rate?
(Round to the nearest cent.)What is the present value of this
cash flow at
24%
discount rate?
Present
value.
A smooth-talking...

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