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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

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