A certain narrow-aisle forklift truck costs $4,000. When it is replaced, it will be replaced with a

Question:

A certain narrow-aisle forklift truck costs $4,000. When it is replaced, it will be replaced with a truck of the same kind. Operating costs for this truck are $500 for the first year and increase at the rate of $40 per year squared thereafter. Technological improvements reduce operating costs by an estimated $30 per year. The of the trucks declines linearly over their seven-year life. The desired rate of return is to be 20 percent before taxes.
When should the equipment be replaced?
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...