Kingscliff Limited Estimated That the Net Present Value of Future

question 7

Multiple Choice

Kingscliff Limited estimated that the net present value of future cash flows from machinery acquired in a business combination is $70 000. The cost of replacing the machinery is estimated to be $76 000. The machinery has been independently appraised at a value of $68 000. A similar item of machinery cost the acquirer $78 000 last year. The value at which the machinery will be recognised when recording the business combination is:

• A) $76 000.
• B) $78 000.
• C) $68 000.
• D) $70 000.

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Definitions:

Costs Of Production

The total expenses incurred in producing goods or services, including raw materials, labor, and overheads.

Willingness To Sell

The minimum price at which a person or entity is prepared to sell a good or service, reflecting the value at which they are ready to part with it.

Producer Surplus

Producer surplus is the difference between what producers are willing to accept for a good or service versus what they actually receive, indicating the benefit to producers.

Market Price

The current price at which a good or service can be bought or sold in the market.