Problem:
Picado, Inc. is investigating an investment in equipment that would have a useful life of 8 years. The company uses a discount rate of 9% in its capital budgeting. The net present value of the investment, excluding the salvage value, is -$389,000. To the nearest whole dollar how large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive?
- $774,900
- $35,010
- $389,000
- $4,322,222
Note: Show supporting computations in good form.