Now assuming planning or performance materiality at Morris Mining is $600,000, answer the following questions (a) How sensitive is the fair value estimate to changes in the discount rate How much would the discount rate estimate have to change for it to have a material impact on the financial state...

a Relative to materiality of 600000 the fair value estimate is highly sensitive to changes in the di ...

Now assuming planning or performance materiality at Morris Mining is $600,000, answer the following questions. (a) How

Question:

Now assuming planning or performance materiality at Morris Mining is $600,000, 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? Why?
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...