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What is the estimated fair value of the trade name

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Question - Waterway Industries owns a trade name that was purchased in an acquisition of Carla Vista Co.. The trade name has a book value of $2100000, but according to IFRS, it is assessed for impairment on an annual basis. To perform this impairment test, Waterway must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Waterway's estimate of annual cash flows over the next 7 years. The trade name is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.)

Probability Assessment

Cash Flow Estimate

30%

$260000

50%

360000

20%

420000

Waterway determines that the appropriate discount rate for this estimation is 5%. To the nearest dollar, what is the estimated fair value of the trade name?

Reference no: EM133140694

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