(Ignore income taxes in this problem.) The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow: If the helicopter is leased, it would be returned to the manufacturer in four years. Wisbley's required rate of return is 22%.
-The present value of the salvage value of the helicopter, if the helicopter is purchased, would be:

Question

(Ignore income taxes in this problem.) The Wisbley Company is contemplating the purchase of a helicopter for its executives to use in their business trips. This helicopter could be either purchased or leased from the manufacturer. The useful life of the helicopter is four years. Data concerning these two alternatives follow:  If the helicopter is leased, it would be returned to the manufacturer in four years. Wisbley's required rate of return is 22%.
-The present value of the salvage value of the helicopter, if the helicopter is purchased, would be:

Quizplus · Accepted Answer

The present value of the salvage value is calculated by discounting the future salvage value to the present using the appropriate discount rate. The correct calculation results in $121,770.

(Ignore Income Taxes in This Problem