The Swimmers Co.'s Boat's value in use (net present value) is Eur 321,221.
Data and Calculations:
Pre-tax discount rate = 5% p.a., excluding inflation
Inflation rate = 2% p.a.
Inflated discount rate = 7% (5% + 2%)
Salvage value = Eur 20,000
<u>Projected cash inflows:</u>
Year Cash Inflows Discount Factor Discounted Cash flows
20X4 Eur 72,000 0.935 $67,320
20X5 Eur 69,000 0.873 60,237
20X6 Eur 64,000 0.816 52,224
20X7 Eur 59,000 0.763 45,017
20X8 Eur 52,000 0.666 34,632
20X9 Eur 45,000 0.623 28,035
20X10 Eur 38,000 0.582 22,116
20X10 Eur 20,000 0.582 11,640
Total discounted cash flows Eur 321,221
Thus, the Swimmers Co. will calculate the boat's value in use as Eur 321,221, taking into account all the discounted cash inflows.
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