With regard to choosing a discount rate when using a

discounted cash flow technique to value a biological asset, the following advice adopted from IAS39 paragraphs AG76, AG76A and BC104 is especially relevant:

0% Factor

Discounted Cash Flow Sum of

Discounted Cash Flows Less: Interest-bearing Debt Total Equity Value Indication (Dollar amounts are in thousands) Description Year 1 Year 2 Year 3 Net Sales Revenue, $278,750 $292,688 $307,322 growing annually Less: Cost of Goods 144,393 151,612 159,193 Sold Gross Profit 134,357 141,076 148,129 Less: Operating & 118,469 124,392 130,612 Admin.

Discounted cash flows are values of future expected cash receipts and expenditures at a common date.

When using the traditional approach to present value measurement, a CPA would calculate

discounted cash flows for the six assets as follows:

This article develops three

discounted cash flow models to value the future cash flows associated with income-producing property: a deterministic model, sensitivity analysis, and a probabilistic model.

Therefore, the

discounted cash flow is $80,000 x 3.

Step 3: The transfer of the

Discounted Cash Flows from the PRESENT VALUE CALCULATIONS section to the SUMMARY, and the compilation of the Discounted Net Cost.

If projected

discounted cash flows are not adequate, the Company may be required to expense some or all of these costs in the period in which such a determination is made or reduce the remaining useful life.

The recalculated

discounted cash flows can be compared with the initial computations and the reasons for the variance used to inform similar projects in the future.

The payback period, while attractive due to its simplicity, doesn't account for indirect costs or

discounted cash flows.

Allows for

discounted cash flows or earnings using a variety of selected discount rates.

During year 1 (actually the second year), the purchase option shows the largest nondiscounted and

discounted cash flows -- $138,750 and $129,673, respectively.