FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Windsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fair
value under each scenario, and calculate the fair value using the present value tables
Scenario 1. Cash flows are fairly certain
$260/year for 5 years
Risk-adjusted discount rate is 6%
Risk-free discount rate is 2%
Scenario 1:1
(For calculation purposes, use 5 decimal places as displayed in the factor toble provided. Round final answers to 2 decimal places, eg 5.275.25)
Click here to view the factor table PRESENT VALUE OF 1
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1
Windsor might use
Scenario 2: Cash flows are uncertain
75% probability that cash flows will be $260 in 5 years
25% probability that cash flows will be $115 in 5 years
Risk-adjusted discount rate is 6%
Fair value
Risk-free discount rate is 25
model
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Transcribed Image Text:Windsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fair value under each scenario, and calculate the fair value using the present value tables Scenario 1. Cash flows are fairly certain $260/year for 5 years Risk-adjusted discount rate is 6% Risk-free discount rate is 2% Scenario 1:1 (For calculation purposes, use 5 decimal places as displayed in the factor toble provided. Round final answers to 2 decimal places, eg 5.275.25) Click here to view the factor table PRESENT VALUE OF 1 Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1 Windsor might use Scenario 2: Cash flows are uncertain 75% probability that cash flows will be $260 in 5 years 25% probability that cash flows will be $115 in 5 years Risk-adjusted discount rate is 6% Fair value Risk-free discount rate is 25 model
(For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25)
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1
Scenario 1
Windsor might use
Fair value
Scenario 2
Windsor might use
Fair value
$
model.
model
expand button
Transcribed Image Text:(For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25) Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1 Scenario 1 Windsor might use Fair value Scenario 2 Windsor might use Fair value $ model. model
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