The AW of a 3-year-old machine that is used in the manufacture of modular magnetic encoders, which

Question:

The AW of a 3-year-old machine that is used in the manufacture of modular magnetic encoders, which provide data on the speed and positioning of rotating motor shafts, is $−48,000. A challenger will have a first cost of $90,000, an operating cost of $29,000, and a salvage value after 5 years that may vary considerably. For an interest rate of 10% per year and optimistic, most likely, and pessimistic salvage values of $15,000, $10,000, and $2000, respectively, the salvage value(s) for which the challenger AW will be lower than that of the defender are:

(a) All of them

(b) Only the optimistic one

(d) None of them

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...