Three mutually exclusive alternatives are being considered. Each alternative has a 20-year useful life with no salvage

Question:

Three mutually exclusive alternatives are being considered.

A B Initial investment $15.000 $50.000 $22.000 Annual net income 5.093 2.077 1.643 Computed rate 8% 7%

Each alternative has a 20-year useful life with no salvage value. If the minimum attractive rate of return is 7%, which alternative should be selected?

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...