A company has some equipment that they know will be

Question

A company has some equipment that they know will be obsolete in five years. They expect, though, that it will have some recycling value, and the purchasing department (which handles disposals) thinks they’ll be able to get about $5,000 for it at that point. If interest rates are expected to average around 5% over that time period, what is the recycling value of the equipment in today’s dollars?

Answer 1

A=$5000

i=0.05

n=5

P=A/(1+i)ⁿ=5000/(1+0.05)⁵=5000/1.27628=$3917.64