Problem 6-14 At the end of 2017, Cheyenne 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 Cheyennes production process, the equipment is for special use. (No secondhand market values are available.) The equipment will be obsolete in 2 years, and Cheyennes accountants have developed the following cash flow information for the equipment.

Year Net Cash Flow Estimate Probability Assessment

2018 $5,970 40%

8,760 60%

2019 $(470 ) 20%

1,830 60%

3,600 20%

Scrap value

2019 $550 50%

860 50%

Using expected cash flow and present value techniques, determine the fair value of the machinery at the end of 2017. Use a 6% discount rate. Assume all cash flows occur at the end of the year.

Fair value of the machinery at the end of 2017 ___________________