A machine costs $1,000, has a three-year life, and has an estimated salvage value of $100. It

Question:

A machine costs $1,000, has a three-year life, and has an estimated of $100. It will generate after-tax annual cash flows (ACF) of $600 a year, starting next year. If your required rate of return for the project is 10%, what is the NPV of this investment?
a. $490
b. $570
c. $900
d. -$150

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...