Croce, Inc., is investigating an investment in equipment that would have a useful life of 7 years. The company uses a discount rate of 15% in its capital budgeting. The net present value of the investment, excluding the salvage value, is $580,198. (Ignore income taxes.)

Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.

How large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive?

Answers: Multiple Choice

• $580,198

• $87,030

• $3,867,987

• $1,543,080