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. Ignore income tax effects. Use present value factors attached. 

Present Value of a Lump-Sum Rate of interest od in 396 286 496 5% 0.9709 9524 0.9259 0.9174 0.8929 0.8772 0.8696 0.862 0.8333 2 0. 9426 0.9070 0.8573 0.84 0.8265 0.7972 0.7695 0.756 0.7432 0.6944 9151 0.8633 0.7938 0.7722 0.7513 0.7118 0.0750 0.6575 0.0407 0.5787 4 0.8885 0.822 0.7350 0.7084 0.6830 0.6355 0.592 0.5718 0.5523 0.4823 5 0.8626 0.7835 0.6806 0.6499 0.6209 0.5674 0.5194 0.4972 0.476 0.4019 6 0.8375 0.7462 0.62 0.5963 0.5645 05066 0.4556 0.4323 0.4104 0.3349 7 0.8131 0.7107 0.5835 0.5470 0.5132 0.4523 03996 0.3759 0.3538 0.279 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 0.424 0.3606 0.3075 0.2843 0.2630 0.1938 0 0.744) 0.6139 0.4632 0.4224 0.3855 0.3220 0.2697 0.2472 0.2267 0.1615 2 0,7014 0.5568 0.397 0.3555 0.3186 02567 02076 0.1869 0.1685 5 0. 6419 0.4810 0.3152 0.2745 0.2394 0.1827 0.140 0.1229 0.1079 0.0649 6 0,6232 0,458 0.2919 0.2519 0.2176 0.16 0.1229 0.1069 0.0930 0.054 7 0,6050 0,4363 0.2703 0.23 0.1978 0.1456 0.1078 0.0929 0.0802 0.047 0,5874 0,4155 0.2503 0.2120 0.1799 0.1300 0.0946 0.0808 0.069 0.0376 9 0,5703 0,3957 0.2317 0.1945 0.1635 0.116 0.0703 0.0596 0.0313 20 0,5537 0,3769 0.2146 0.1784 0.1486 0.1037 0.0728 0.0514 0.026 0.5375 0.3589 0.1987 0.1637 0.135 0.0638 0.05 0.0443 0.0217 24 0,4920 0,3101 0.1577 0.1264 0.1015 0.0659 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 an Annuity Rate of interest period in percent per 0.9709 9524 0.9259 09174 0.909 0.8929 0.8772 0.8696 0.862 0.8333 9135 8594 7833 759 7355 .690 .278 2.8286 2.7233 2.577 2.5313 2.4869 2.4018 2.3216 2.2832 2.2459 2.1065 3.5460 3.3121 3.2397 3.1699 3.0374 2.9137 2.8550 2.7982 2.5887 5 4,5797 4.3295 3,992 3.8897 3.7908 3.6048 3.43 3.3522 3.274 2.9906 5.4172 5.075 4,6229 4.4859 4.3553 3.8887 3.7845 3.6847 3.3255 6.2303 5.7864 5.2064 5.0330 4.8684 4.5638 4.2883 4.1604 4.0386 3.6046 0197 6,4632 5.7466 5.5348 5.3349 4.9676 4.6389 4.4873 4.3436 3,8372 9 7,7961 7.1073 6.2469 5.9953 5.7590 5.3283 4.7716 4.6065 4.0310 3.5302 7.72 6.710 6.4177 6.1446 5.6502 5.216 5.0138 4.8332 4.1925 9.9540 3.8633 536 7.1607 6.8137 6.1944 5.4206 5.197 4.4392 .9379 0.3797 8.5595 6.8109 6.1422 5.8474 5.5755 4.6755 5.9542 2.5 0.8378 8.8514 8.3126 .8237 6.265 5.6685 4.7296 17 -274 9.1216 8.5436 8.0215 6.3729 6.0472 5.7487 4.7746 66 8.7556 8.2014 5.8178 3.7535 6896 9.3719 64674 6.1280 4.8122 4.3238 2.0853 9.6036 8.3649 7.3658 65504 6.1932 5.8775 4.8435 4.8775 2.4622 9.8182 9.1286 8.5135 6.023 6.2593 5.9288 4.8696 5.4150 2.8212 10.0168 9.2922 8.648 75620 6.6870 6.3125 5.973 4.8913 25 17.4132 4.0939 10.6748 9.8226 9.0770 .843 6.8729 6.464. 6.097 4.9476