What is the best option for a construction company

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A construction company specialised in motor highway construction has to decide whether to restore a "tractor with scraper" or to replace it with a new one. Five years ago the existing "tractor with scraper" was bought for $ 52000 with an expected lifetime of 15 years. At the time of the sale the salvage value was estimated $ 3700. If the company would sell the "tractor with scraper" now, the trade in value would be $ 22000. The restore costs of the current machine are $ 7400. After the restoration, the yearly operating cost will be $ 5950. The salvage value in 10 years from now will be $ 2980. A "tractor with scraper" can be bought for $ 59500. The yearly operating cost is $ 3700. The salvage value in 10 years from now is $ 30000. The minimum required rate of return by the company is 10 %. What is the best option?

Reference no: EM131086409

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