Question
ConstructTech acquired a production plant at a cost of 900,000 with an estimated residual value of 70,000 and an estimated useful life of six years.
ConstructTech acquired a production plant at a cost of €900,000 with an estimated residual value of €70,000 and an estimated useful life of six years. The company applies the straight-line depreciation method. The company estimates the following net cash inflows: €260,000 on 31 December 20X3, €210,000 on 31 December 20X4, and €200,000 on 31 December 20X5. The values of €1 at the end of each year are 0.89 for year 1, 0.83 for year 2, and 0.76 for year 3. Required: Prepare a comprehensive impairment analysis and discuss the impact on the company’s financial performance.
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