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Jojola Corporation is investigating buying a small used aircraft for the use of its executives
Jojola Corporation is investigating buying a small used aircraft for the use of its executives. The aircraft would have a useful life of 5 years. The company uses a discount rate of 13% in its capital budgeting. The net present value of the initial investment and the annual operating cash cost is −$439,238. Management is having difficulty estimating the annual benefit of having the aircraft and estimating the salvage value of the aircraft. (Ignore income taxes.) Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Ignoring the annual benefit, to the nearest whole dollar how large would the salvage value of the aircraft have to be to make the investment in the aircraft financially attractive?
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