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February 24, 2020 at 10:06 am
Good day May I please understand why in the computation of value in use we used 5000*3.791
and why did we not use the formula C(1+10%)^5
Thank you in advance for the answer
April 1, 2020 at 8:50 pm
I believe we are discounting the future cash flows to present value for the VIU. Your formula is based on inflating the value.
April 2, 2020 at 8:50 am
After using the given formula, I believe the answer still remains the same. They have directly given the annuity factor.
June 9, 2020 at 8:42 pm
1 / (1 x (1 + 10%) ^ n) – is a discounting factor. Considering the fact that we expect to receive 5,000 each year, discount factor will also be different for each year: Year 1 – 0.909090909 Year 2 – 0.826446281 Year 3 – 0.751314801 Year 4 – 0.683013455 Year 5 – 0.620921323 Then each factor is multiplied by 5,000 for each year, then summed and it gives us the same 18,955.
Annuity factor, in contrast, already counts the fact that we receive this 5,000 annually for 5 years: =(1-(1+10%)^-5)/10%. Therefore it makes it way easier to calculate one factor and multiply it just one time.
Also factors are given in exam and they always should be used if there’s a need.
February 21, 2020 at 2:11 pm
Your Value in use (5000*3.791)=18,955
October 17, 2019 at 8:02 am
what about the cost of capital at 10 % do we just ignore it ?
October 2, 2019 at 6:40 am
what about the cost of capital 10%
August 5, 2019 at 6:00 pm
18955, not 18995. at 9:48
October 6, 2018 at 12:21 pm
how is the depreciation 5,000?
October 6, 2018 at 8:05 pm
25000 is dep for 5 years, 5000 is dep for 1 year. we take dep of only 1 year as the reporting period is of 1 year.
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