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P2-D2.
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Eunice03
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LichenCo owns amachine that has a carrying amount of $85,000 at the year end of
31 March 20X9.Its market value is $78,000 and costs of disposal are estimated at $2,500.
A new machine would cost $150,000. LichenCo expects it to produce net cashflows of
$30,000perannum for the next three years.The cost of capital of LichenCo is 8%.
ANS
Good day sir, I tried calculating the net cashflows for the 3 years as (30000*3)/(1.08)^3 and it was wrong. Please can you explain why?
P2-D2
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Hi,
You need to calculate the annuity factor for three years at 8% to work out the present value of the 30,000.
Thanks
Eunice03
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