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Calculate the salvage value for this piece of equipment

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Question - Darby's 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 $38,000

Salvage value in 8 years 20% of initial investment

Repair in 5 years $16,000

Working capital needed now $31,000

Cost of capital 14%

Life of project 8 years

The working capital needed now will be released for investment elsewhere at the end of the eight years.

The net present value of the new equipment is -$26,656.

Calculate the salvage value for this piece of equipment. You will need to use the present value table factors.

Reference no: EM133164095

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