Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

XYZ Company is considering the purchase of a new piece of equipment and has gathered the following information about the purchase: Initial investment ................ ?

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 ............... $20,000 Salvage value in 6 years .......... 20% of original cost of the equipment Repair in 4 years ................. $11,000 Cost of capital ................... 10% Life of project ................... 6 years If the new piece of equipment is purchased then the equipment currently being used can be sold at the time of purchase of the new equipment for $7,000. The net present value of this investment was calculated to be -$28,730. 
Calculate the salvage value for this piece of equipment. Do not use decimals in your answer. Ignore income tax effects. 

Using the table below

Present Value of a Lump-Sum

Rate of interest per period in percent

Periods

3%

5%

8%

9%

10%

12%

14%

15%

16%

20%

1

0.9709

0.9524

0.9259

0.9174

0.9091

0.8929

0.8772

0.8696

0.8621

0.8333

2

0.9426

0.9070

0.8573

0.8417

0.8265

0.7972

0.7695

0.7561

0.7432

0.6944

3

0.9151

0.8638

0.7938

0.7722

0.7513

0.7118

0.6750

0.6575

0.6407

0.5787

4

0.8885

0.8227

0.7350

0.7084

0.6830

0.6355

0.5921

0.5718

0.5523

0.4823

5

0.8626

0.7835

0.6806

0.6499

0.6209

0.5674

0.5194

0.4972

0.4761

0.4019

6

0.8375

0.7462

0.6311

0.5963

0.5645

0.5066

0.4556

0.4323

0.4104

0.3349

7

0.8131

0.7107

0.5835

0.5470

0.5132

0.4523

0.3996

0.3759

0.3538

0.2791

8

0.7894

0.6768

0.5403

0.5019

0.4665

0.4039

0.3506

0.3269

0.3050

0.2326

9

0.7664

0.6446

0.5003

0.4604

0.4241

0.3606

0.3075

0.2843

0.2630

0.1938

10

0.7441

0.6139

0.4632

0.4224

0.3855

0.3220

0.2697

0.2472

0.2267

0.1615

12

0.7014

0.5568

0.3971

0.3555

0.3186

0.2567

0.2076

0.1869

0.1685

0.1122

15

0.6419

0.4810

0.3152

0.2745

0.2394

0.1827

0.1401

0.1229

0.1079

0.0649

16

0.6232

0.4581

0.2919

0.2519

0.2176

0.1631

0.1229

0.1069

0.0930

0.0541

17

0.6050

0.4363

0.2703

0.2311

0.1978

0.1456

0.1078

0.0929

0.0802

0.0471

18

0.5874

0.4155

0.2503

0.2120

0.1799

0.1300

0.0946

0.0808

0.0691

0.0376

19

0.5703

0.3957

0.2317

0.1945

0.1635

0.1161

0.0829

0.0703

0.0596

0.0313

20

0.5537

0.3769

0.2146

0.1784

0.1486

0.1037

0.0728

0.0611

0.0514

0.0261

21

0.5375

0.3589

0.1987

0.1637

0.1351

0.0926

0.0638

0.0531

0.0443

0.0217

24

0.4920

0.3101

0.1577

0.1264

0.1015

0.0659

0.0431

0.0349

0.0284

0.0126

25

0.4776

0.2953

0.1460

0.1160

0.0923

0.0588

0.0378

0.0304

0.0245

0.0105

Present Value of Annuity Table

Periods

3%

5%

8%

9%

10%

12%

14%

15%

16%

20%

1

0.9709

0.9524

0.9259

0.9174

0.9091

0.8929

0.8772

0.8696

0.8621

0.8333

2

1.9135

1.8594

1.7833

1.7591

1.7355

1.6901

1.6467

1.6257

1.6052

1.5278

3

2.8286

2.7233

2.5771

2.5313

2.4869

2.4018

2.3216

2.2832

2.2459

2.1065

4

3.7171

3.5460

3.3121

3.2397

3.1699

3.0374

2.9137

2.8550

2.7982

2.5887

5

4.5797

4.3295

3.9927

3.8897

3.7908

3.6048

3.4331

3.3522

3.2743

2.9906

6

5.4172

5.0757

4.6229

4.4859

4.3553

4.1114

3.8887

3.7845

3.6847

3.3255

7

6.2303

5.7864

5.2064

5.0330

4.8684

4.5638

4.2883

4.1604

4.0386

3.6046

8

7.0197

6.4632

5.7466

5.5348

5.3349

4.9676

4.6389

4.4873

4.3436

3.8372

9

7.7861

7.1078

6.2469

5.9953

5.7590

5.3283

4.9464

4.7716

4.6065

4.0310

10

8.5302

7.7217

6.7101

6.4177

6.1446

5.6502

5.2161

5.0188

4.8332

4.1925

12

9.9540

8.8633

7.5361

7.1607

6.8137

6.1944

5.6603

5.4206

5.1971

4.4392

15

11.9379

10.3797

8.5595

8.0607

7.6061

6.8109

6.1422

5.8474

5.5755

4.6755

16

12.5611

10.8378

8.8514

8.3126

7.8237

6.9740

6.2651

5.9542

5.6685

4.7296

17

13.1661

11.2741

9.1216

8.5436

8.0215

7.1196

6.3729

6.0472

5.7487

4.7746

18

13.7535

11.6896

9.3719

8.7556

8.2014

7.2497

6.4674

6.1280

5.8178

4.8122

19

14.3238

12.0853

9.6036

8.9501

8.3649

7.3658

6.5504

6.1982

5.8775

4.8435

20

14.8775

12.4622

9.8182

9.1286

8.5135

7.4694

6.6231

6.2593

5.9288

4.8696

21

15.4150

12.8212

10.0168

9.2922

8.6487

7.5620

6.6870

6.3125

5.9731

4.8913

25

17.4132

14.0939

10.6748

9.8226

9.0770

7.8431

6.8729

6.4641

6.0971

4.9476

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Text Only

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel

5th Edition

0006575404, 978-0006575405

More Books

Students also viewed these Accounting questions