Perlaise, whose functional currency is the euro, holds a bottling plant in the United States. At 31 December 20X1, the net cash flows expected from this asset are 110,000 units USD in 20X2 and 121,000 units USD in 20X3, with no other cash flows. The appropriate pre-tax discount rate for the dollar is 10 %. At 31 December 20X1, the spot rate is 1 USD = 0.9 units EUR. Calculate value in use in dollars, then in euros.
- Net cash flow for 20X2 (USD)
- 110,000
- Net cash flow for 20X3 (USD)
- 121,000
- Dollar-specific discount rate
- 10 %
- Spot rate (EUR per 1 USD)
- 0.9