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I want to know how to calculate salvage value of the projects in this problem. Tnx

I want to know how to calculate salvage value of the projects in this problem. Tnx

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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I want to know how to calculate salvage value of the projects in this problem. Tnx

EXAMPLE 5.8 Present-Worth Comparison: Project Lives Shorter than the Analysis Period Phoenix Manufacturing Company is planning to modernize one of its distribution centers located outside Denver, Colorado. Two options to move goods in the dis- tribution center have been under consideration: a conveyor system and forklift trucks. The firm expects that the distribution center will be operational for the next 10 years, and then it will be converted into a factory outlet. The conveyor system would last eight years whereas the forklift trucks would last only six years. The two options will be designed differently but will have identical capacities and will do exactly the same job. The expected cash flows for the two options, including main- tenance costs, salvage values, and tax effects, are as follows: Conveyor System Lift Trucks -$68,000 -$40,000 0. 1. 2 -$13,000 -$15,000 -%$413,000 -$15,000 -$13,000 -$15,000 3. -$13,000 -$15,000 4. -$13,000 -$15,000 -$13,000 -$15,000 + $4,000 9. -$13,000 7. -$13,000 + $5,000 8. With this scenario, which option should the firm select at MARR = 12%? %3D
Transcribed Image Text:EXAMPLE 5.8 Present-Worth Comparison: Project Lives Shorter than the Analysis Period Phoenix Manufacturing Company is planning to modernize one of its distribution centers located outside Denver, Colorado. Two options to move goods in the dis- tribution center have been under consideration: a conveyor system and forklift trucks. The firm expects that the distribution center will be operational for the next 10 years, and then it will be converted into a factory outlet. The conveyor system would last eight years whereas the forklift trucks would last only six years. The two options will be designed differently but will have identical capacities and will do exactly the same job. The expected cash flows for the two options, including main- tenance costs, salvage values, and tax effects, are as follows: Conveyor System Lift Trucks -$68,000 -$40,000 0. 1. 2 -$13,000 -$15,000 -%$413,000 -$15,000 -$13,000 -$15,000 3. -$13,000 -$15,000 4. -$13,000 -$15,000 -$13,000 -$15,000 + $4,000 9. -$13,000 7. -$13,000 + $5,000 8. With this scenario, which option should the firm select at MARR = 12%? %3D
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