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What is the impairment loss for cosmo

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Reference no: EM132970394

Cosmo has a large piece of machinery, and management has determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the machine:

Net book value = $14M
the machine could be sold for $6M less a 10% commission

  • If the company was forced to sell immediately, the proceeds would likely be $5M
  • If the machine continues to be used in production, it is anticipated to generate $3M of cash flows for the next 5 years. It would require annual maintenance costs of $200,000/year. The equipment could be sold for $100,000 at the end of 5 years.
  • Assume the company has a discount rate of 6%

Requirement

Problem 1: Is the machine impaired? If so, what is the impairment loss?

Reference no: EM132970394

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