Part 2 of 8 of 6 Cupcakes-R-Us, Inc. is reviewing all available information regarding the future use of its baking equipment, which it intends to use for the foreseeable future. (Click the icon to view additional information.) Future Value of $1 table Future Value of an Ordinary Annuity table Future Value of an Annuity Due table Present Value of $1 table Present Value of an Ordinary Annuity table Present Value of an Annuity Due table Read the requirements. fo More info The company has observed a decline in the demand for its products. The information also indicates that this equipment may be obsolete and could be impaired. Cupcakes-R-Us acquired the equipment 2 years ago at a cost of $500,000 and depreciated it using the straight-line method with an estimated residual value of $10,000 and a 7-year useful life. At the end of the second year, management estimates the following cash flows from the use of the asset: Cash-Flow Projection Cash-Flow Projection -Estimate 1 - Estimate 2 Future Period Year 1 120,000 120,000 Year 2 100,000 100,000 Year 3 70,000 80,000 Year 4 35,000 35,000 30,000 30,000+ Year 5 355,000 $ 365,000 Total . The cash expected on the disposal of the asset at the end of its useful life is included in the last cash flow. Assume all cash flows occur at the end of the - Requirement a. Compute the carrying value of Cupcakes-R-Us's equipment. The carrying value of the baking equipment at the end of two years is $ 360,000 Fatimate ? Assume that Requirement b. Compute the present value of expected cash flows under Estimate 1 and Estimate 2. Assume that the cost of capital is 8%. For each estimate, is the present value of estimated future cash flows higher or lower than the equipment's carrying value? Begin by calculating the present value (PV) of estimated future cash flows for Estimate 1. In the following steps, calculate the PV of estimated future cash flows for Estimate 2, and then identify if the present value of the estimated future cash flows is higher or lower than the equipment's carrying value. (Use the present value and future value tables, the formula method, a financial calculator, or a spreadsheet for your calculations. If using present and future value tables or the formula method, use factor amounts rounded to five decimal places, X.XXXXX. Round intermediary calculations and your final answers to the nearest whole dollar.) Cash-Flow Projection- PV of Cash-Flow Projection- Future Period Estimate 1 Estimate 1 Year 1 $ 120,000 Year 2 100,000 Year 3 70,000 Year 4 35,000 30,000 Year 5 $ 355,000