Dick Dickerson Construction Inc. has asked to you help them select a new backhoe. You have a

Question:

Dick Dickerson Construction Inc. has asked to you help them select a new backhoe. You have a choice between a wheel-mounted version, which costs $50,000 and has an expected life of 5 years and a salvage value of $2000, and a track-mounted one, which costs $80,000, with a 5-year life and an expected salvage value of $10,000. Both machines will achieve the same productivity. Interest is 8%. Which one will you recommend? Use a present worth analysis.

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...