A delivery car had a first cost of $30,000, an annual operating cost of $12,000, and an
Question:
A delivery car had a first cost of $30,000, an annual operating cost of $12,000, and an estimated $4000 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 2 years and must be sold now as a used vehicle.
(a) At an interest rate of 10% per year, what must the market value of the 2-year-old vehicle be in order for its AW value to be the same as the AW for a full 6-year life cycle?
(b) Compare your answer in (a) with the first cost and expected salvage after 6 years. Is the required market value a reasonable one, in your opinion?
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: