Question

Question 3 4.5 pts XYZ Company is considering the purchase of a new piece of equipment and has gathered the following information about the purchase: Initial investment ........ ...... Annual cost savings ............. Salvage value in 6 years. Repair in 4 years ..... Cost of capital .. Life of project ................. ? $20,000 20% of original cost of the equipment $14,000 10% 6 years The net present value of this new equipment was -$37,779. Calculate the salvage value for this piece of equipment. You will need to use the time value of money table factors posted in carmen to answer this question. To access these factors, click modules and then scroll to week 8. Click on the link labeled present & future value table factors. No credit will be awarded for this question using a means other than these table factors to answer this question.

Answer 1

computation of Salvage value of . equipment. Let x be the value of anitial anvestment for this purpose first we have to calculate present value of cash anflows. da o yoo year Net cashriflows pv f@ 10% discounted cash anflows $ 20,000 O gogo $ 18180 201000 0.8264 16528 20,000 0.7513 15026 6000 0-6830 4098 20.000 0.6209 (2418. 201000 6.5644 11288 0- 2x 105644 0.1128824 (salbage valle Po bes present value of cash ->77538 +0' 1|288x Qn flows Net present value = present value of cash Grflows - Initial anvestment - $37779 = 74538+0.112882 - 2 0.88712 a = $ 115317 a = $ 129 990 31 Salvage value = $ 129 990.31x® 20% = $ 25998.06

Note :- 4th year i have take het cash anflows (or bouings- & 6000 $ 20,000 - $19000]