1. During your audit, you learn that Other Assets includes a 7-year, nonrenewable license that Zoom acquired at the beginning of the year which gives the company broadcasting rights (and thus can ultimately earn licensing fees) for a series of extreme snowboarding videos. When they purchased the license, Zoom estimated that there would be a resultant $150,000 in cash flows/revenues the first year, a growth rate of 15% year-over-year in years 2-4 and a growth rate of 5% year-over-year in years 5-7. The risk- free interest rate is 4%; however, since the receipt of the cash flows is uncertain, Zoom used a 10% risk-adjusted rate in its calculations. Zoom calculated that the Fair Value of the asset is $1,271,424.

What valuation approach should be used in calculating the FV of this asset? What is the input level? Provide support for the input level you assign.

Do you agree with the clients FV calculation of the asset? If you disagree, what should the FV be (insert a screenshot showing your calculations).