Nguyen Limited Estimated That It Would Receive Future Cash Flows $\blacktriangleright$

question 23

Multiple Choice

Nguyen Limited estimated that it would receive future cash flows from the use of equipment:
$\blacktriangleright$ End of Year 1 $10 000
$\blacktriangleright$ End of Year 2 $50 000
$\blacktriangleright$ End of Year 3 $20 000
The discount rate was determined as 8%. The 'value in use' of the equipment is:

• A) $80 000
• B) $73 600
• C) $68 000
• D) $63 500.

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Definitions:

Grinding Costs

Costs incurred in the process of grinding materials; typically associated with manufacturing processes that require fine material breakdown.

Investment Center

A subunit of the firm that has decision rights over the amount of capital to be invested, the prices of its products, and the manufacturing process and is usually composed of several profit centers.

Profit Center

A subunit of the firm with the decision rights over prices and manufacturing processes to maximize profit. Profit centers are evaluated on meeting target profits and are composed of several cost centers.

Responsibility Centers

Units or departments within an organization whose managers are accountable for specific financial operations and performance.