11-X CAPITAL BUDGETING & SALVAGE VALUE. An emergency response company can purchase a new...
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Finance
11-X
CAPITAL BUDGETING & SALVAGE VALUE.
An emergency response company can purchase a new ambulance for $150,000 and must add $100,000 of equipment, for a total cost of $250,000.
The company projects that its net cash flow over the next five years will be: $65,000, $75,000, $100,000, $68,000, $73,000. The salvage value of the vehicle will be $13,000 at the end of year 5. Assume that the vehicle is sold at the end of year 5.
Calculate the NPV of the ambulance if the required rate of return is 9.0%.
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