Question

The salvage value on a piece of equipment for Excavators, Inc. is expected to be $10,000 in 12 years. If the discount rate is 8%, what is the present value of the equipment's salvage value? A : $3,220 B : $4,039 C : $3,971 D : $3,168

Answer 1

Answer:

correct option is  C : $3,971

Explanation:

given data

salvage value = $10,000

time = 12 year

rate = 8 %

to find out

what is the present value of the equipment's salvage value

solution

we get here present value of the equipment salvage value that is express as

present value of the equipment = $10000 × Present value of discounting factor

put here value we get

= $\frac{salvage\ value}{(1+rate)^t}$

= $\frac{10000}{(1+0.08)^{12}}$

= 3971

so correct option is  C : $3,971