Alternative A has a first cost of $50,000, life of seven years, salvage value of $5,000 at

Question:

Alternative A has a first cost of $50,000, life of seven years, of $5,000 at that time, and annual operating costs of $3,000 per year. Alternative B has a first cost of $65,000, operating costs of $6,000 per year, salvage of $6,000, and a life of nine years. If the desired return on investment is 20%, select the best alternative.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...