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On January 1, 2014, Borstad Company purchased equipment for $1,200,000. It is depreciating the equipment over 25 years using the straight-line method and a zero

On January 1, 2014, Borstad Company purchased equipment for $1,200,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $390,000 and will incur cash outflows of $282,000 each year for the next 8 years. It is not able to determine the fair value of the equipment based on a current selling price. Borstads discount rate is 12%.

3. How would your answer to Requirement 1 change if the discount rate was 16% and the cash flows were expected to continue for 6 years?

*Borstad Company would recognize a loss of $_________ if the discount rate was 16% and the cash flows were expected to continue for 6 years.

4. How would your answer change if management planned to implement efficiencies that would save $15,000 each year?

Equipment-----------------------------------------$1,200,000

Less: Accumulated Depreciation-------------$288,000

Book Value-----------------------------------------$912,000

Undiscounted expected net cash flows-----$_______???

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