Question #1 What is the net present value of an item that has a purchase price of $20,000, requires $1,000 maintenance at the end of each year except year 4, and is expected to have a salvage value of $1,000 at the end of the 5 year useful life?
Projected Salvage Value $1000 after 5 years
DF= 1 1 1 1 0.9013
(1+i)t (1+.021)5 (1.021)5 1.1095
t Cash Flow DF PV
0 $(20,000) 1.0000 $(20,000)
1 $(1,000) 0.9794 $(979)
2 $(1,000) 0.9593 $(959)
3 $(1,000) 0.9396 $(940)
4 $- 0.0000 $0
5 $(1,000) 0.9013 $(901)
5 $1,000 0.9013 $901