Shoals Corporation puts signicant emphasis on cash ow when planning capital investments. The company chose its discount rate ofB percent based on the rate of return it must pay its owners and creditors. Using that rate, Shoals Corporation then uses different methods to determine the most appropriate capital outlays. This year, Shoals Corporation is considering buying ve new backhoes to replace the backhoes it now owns. The new badrhoes are faster, cost less to run. provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just ne, but they do require considerabie maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skilis to use the new backhoes. The following information is available to use in deciding whether to purchase the new backhoes: Old Backhoes New Backhoes Purchase oost when new $90,000 $200,000 Salvage value now $42,000 Investment in major overhaul needed in next year 555,000 Salvage value in 8 years $15,000 $90,000 Remaining life 8 years 8 yea rs Net cash ow generated each year 330,425 $43,300