x

Corp. is contemplating the purchase of a machine for

$30,000

. The machine has an expected useful life of 4 years and will be depreciated using the straight-line method. After the 4 year life,

x

Corp. expects to recover a salvage value estimated at

$6,000

. X Corp. has an after-tax cost of capital of

16%

and a

30%

tax rate.\ REQUIRED : Compute the Present Value of the expected salvage value for capital budgeting purposes. Assume that the machine would be fully depreciated at the end of the project's life. Use the present value factors shown below.\ Present value of

$1@16%

for 4 periods

=0.552

\ Present value of an annuity of

$1@16%

for 4 periods

=2.798

\

$6,000

\

$5,184

\

$4,200

\

$3,312

\

$2,318

X Corp. is contemplating the purchase of a machine for $30,000. The machine has an expected useful life of 4 years and will be depreciated using the straight-line method. After the 4 year life, X Corp. expects to recover a salvage value estimated at $6,000. X Corp. has an after-tax cost of capital of 16% and a 30% tax rate. REQUIRED : Compute the Present Value of the expected salvage value for capital budgeting purposes. Assume that the machine would be fully depreciated at the end of the project's life. Use the present value factors shown below. Present value of $1 @ 16% for 4 periods =0.552 Present value of an annuity of $1@16% for 4 periods =2.798 $6,000 $5,184 $4,200 $3,312 $2,318