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Economic Analysis: Net Present Value

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What would be the present value of an item that has a salvage value of $25,000 at the end of five years? Assume a discount rate of 3.8% for an end-of-year factor. Carry calculations to four decimal places.

A - $24,085

B - $24,050

C - $25,950

D - $20,747

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Thanks for your question!

Please see the attached MS Word and Excel documents for correct formatting of the charts.

To answer this question we first need to understand the concept of Net Present Value. Since money now is always worth more than money one year from now, we ...

Solution Summary

How to calculate the value of an item with a known salvage value at the end of 5 years and a given discount rate.

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Pine valley furniture recently implemented a new internship program and has begun recruiting interns from nearby university campuses. As part of this program, interns have the opportunity to work alongside a systems analysis. This shadowing opportunity provides invaluable insights into the systems analysis and design process. recently you were selected for a six month internship at pine valley furniture, and Jim Woo has been assigned as your supervisor.

At an initial meeting with Jim, he explains that pine valley furniture is currently involved with two important systems development projects, the customer tracking system and webstore. The purpose of the Customer tracking systems is to enable the PVF marketing group to track customer purchase activity and sales trends better. The webstore project will help move the company in to the twenty-first century by facilitating online furniture purchases, with an initial focus on corporate furniture buying. During your meeting with Jim, he reviews the documentation assembled for both systems, Mr. Woo hands you a copy of the Customer Tracking System's economic feasibility analysis. He mentions that he would like to modify the spreadsheet to reflect the information provided in the following table. Because you are familiar with a spreadsheet products, you volunteer to make the modifications for him.

Questions are in the spreadsheet: please show all work thank you.

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