Cheyenne Company owns specialized equipment that was purchased in an acquisition of Riding Company. The...
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Cheyenne Company owns specialized equipment that was purchased in an acquisition of Riding Company. The equipment has a book value of $1,755,000, but according to IFRS it is assessed for impairment on an annual basis. To perform this impairment test, Cheyenne must estimate the fair value of the equipment. It has developed the following cash flow estimates related to the equipment based on internal information. Each cash flow estimate reflects Cheyenne's estimate of annual cash flows over the next 7 years. The equipment is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.) Cheyenne determines, using its own assumptions, that the appropriate discount rate for this estimation is 6%. What is the estimated fair value of the equipment? (Round answer to 0 decimal places, e.g. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Click here to view Table A.2 - PRESENT VALUE OF 1 - (PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 Estimated fair value of the equipment $
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