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X Company is planning to drop a department that has shown a loss over the past few years. Its accountant estimates that the savings from dropping the department will be $18,700 a year for the next 6 years. The accountant also believes that the company will be able to immediately sell some equipment that was used in the department for $17,000. Assuming a discount rate of 5%, what is the net present value of dropping the department?

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x = number xx years x 6 xxxxx | |||

xxxx x | 17000 | Selling xxxxx | |

xxxx 1 to xxxx 6 | xxxxx | cash xxxxxx | |

x = xxxxxxxxxxx xxxx x 5% x 0.05 | |||

NPV x CF x ( xx (1 i)-n)/I x xxxxxxx xxxx xxxxx | |||

x 18700 x (1 x ( x x 0.05) xx x /0.05 x xxxxx | |||

= 18700 x (1 xxxxxxx xxxxxx x 17000 | |||

x 18700 x xxxxxxxxxxx 17000 | |||

= xxxxx * 5.074 x 17000 | |||

= 94883.8 x xxxxx | |||

x xxxxxxxxx | |||