Refer to Figure 5. The present value of the salvage value is

Question

Quizplus · Accepted Answer

From Figure 5, we can see that the salvage value at the end of year 5 is £20,000. Using the discount rate of 8%, we can calculate the present value of the salvage value as follows:
PV = FV / (1 + r)^n
where PV = present value, FV = future value, r = discount rate, and n = number of years.
PV = 20,000 / (1 + 0.08)^5
PV = £18,225
Therefore, the present value of the salvage value is £18,225, which corresponds to choice C. This would be the best choice for the salvage value option.