Question: Examine the 10-year cash flow analysis provided by the client in Appendix A and also available electronically at www.pearsonhighered.com/educator/product/Auditing-Cases-An-Interactive-Learning-Approach/9780133852103.page and verify that the model is

Examine the 10-year cash flow analysis provided by the client in Appendix A and also available electronically at www.pearsonhighered.com/educator/product/Auditing-Cases-An-Interactive-Learning-Approach/9780133852103.page and verify that the model is producing a mathematically sound fair value estimate based on the inputs used by Morris Mining. Assuming that planning or performance materiality for Morris Mining is $10 million, answer the following questions:
(a) How sensitive is the fair value estimate to changes in the How much would the estimate have to change for it to have a material impact on the financial statements?
(b) How sensitive is the fair value estimate to changes in the estimated growth rates? How much would the estimated growth percentages have to change to have a material impact on the fair value estimate? Do rate changes in early years or later years have a larger impact, and why?

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