Croce, Incorporated, is investigating an investment in equipment that would have a useful life of 8 years. The company uses a discount rate of 11% in its capital budgeting. The net present value of the investment, excluding the salvage value, is −$578,940. (Ignore income taxes.)Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.How large would the salvage value of the equipment have to be to make the investment in the equipment financially attractive? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Question

Quizplus · Accepted Answer

The salvage value must be large enough to offset the negative NPV of -$578,940. Using the present value factor for 8 years at 11% (from the tables), the salvage value needed is calculated as $578,940 divided by the present value factor, which results in approximately $1,333,963.

Croce, Incorporated, Is Investigating an Investment in Equipment That Would