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Calculate the salvage value for this piece of equipment

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Reference no: EM131652228

Question - 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.

Attachment:- tvm table factors.rar

Reference no: EM131652228

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