X Company is planning to drop a department that has shown a loss over the past f

Question

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 $20,700 a year for the next 7 years. The accountant also believes that the company will be able to immediately sell some equipment that was used in the department for $11,000. Assuming a discount rate of 4%, what is the net present value of dropping the department? Use tables below of present value

(The answer is not 880689.80 or 869610. I've already tried and still can't get the answer)

Present Value of $1.00

Present Value of an Annuity of $1.00

Period 3% 4% 5% 6% 7% 8% 9% 10% 11% 12%    1 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893    2 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797    3 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712    4 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636    5 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567    6 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507    7 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452    8 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404    9 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361    10 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322

Explanation / Answer

Particulars Cash inflow Discounting factor Present value Savings from elimination of dept 20700 6.002 124241.40 Sale of equipment 11000 1 11000 Net present value 135241.40 or 135241

Related Questions

Navigate

• Browse (All)
• Browse X
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.