Your company currently owns a machine that is costing you $$60,000$ per year. You are considering replacing it with a new machine that would have a first cost of $$60,000,$ and annual operating costs of $$30,000$ per year for three years. You have received three different estimates of the eventual salvage value of the new machine: $$10,000$;$$15,000$; and $$20,000.$ If your company's minimum acceptable rate of return is $12\%$ per year, is the decision of whether to replace the machine sensitive to the estimated salvage value?

Solution: No