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Should the machinery be sold or held for use for three years

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Kanicki Co. plans to sell machinery having a book value of $270,000 for $200,000. This machinery can be used, if desired, for three more years with an annual cash-flow return of $100,000 before taxes. Depreciation will be $90,000 each year if the machinery is kept in operation. The minimum rate of return on investment decisions is 18%. The tax rate is 40%.

Question 1: Should the machinery be sold or held for use for three years? Use the NPV method.

Reference no: EM132590380

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