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An asset purchased 2 years ago for $40,000 is harder to maintain than expected. It can be sold now for $12,000 or kept for a
An asset purchased 2 years ago for $40,000 is harder to maintain than expected. It can be sold now for $12,000 or kept for a maximum of 2 more years, in which case its operating cost will be $20,000 each year, with a salvage value of $10,000 after 1 year or $9000 after two years. A suitable challenger will have an annual worth of $-24,000 per year. At an interest rate of 10% per year, should the defender be replaced now, one year from now, or two years from now?
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