The following information pertains to an investment by the Town of Sutton: Ignore income taxes. The present value of the salvage value (rounded) is

Question

The following information pertains to an investment by the Town of Sutton:  Ignore income taxes. The present value of the salvage value (rounded) is

Quizplus · Accepted Answer

The salvage value at the end of 5 years is $9,000. Given an interest rate of 8%, we can use the Present Value formula to find the present value of the salvage value.

PV = FV / (1 + r)n

where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.

Substituting the given values, we get:

PV = 9,000 / (1 + 0.08)5
PV = $4,848 (rounded)

Therefore, the best choice is B.

The Following Information Pertains to an Investment by the Town