At the end of 2008, Richards Company is conducting an impairment test and needs to develop a fair value estimate for machinery used in its manufacturing operations. Given the nature of Richard's production process, the equipment is for special use. (No second-hand market values are available.) The equipment will be obsolete in 2 years, and Richard's accountants have developed the following cash flow information for the equipment.

Instructions
Using expected cash flow and present value techniques, determine the fair value of the machinery at the end of 2008. Use a 6% discount rate. Assume all cash flows occur at the end of theyear.

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Net Cash FlowProbability Year Estimate Assessment $6,000 8,000 40% 60% 2009 (500) 2,000 3,000 Scrap value $500 700 20% 60% 20% 2010 2010 50% 50%