Demand for a product manufactured by Eagle Manufacturing is expected to be 15 000 units per year

Question:

Demand for a product manufactured by Eagle Manufacturing is expected to be 15 000 units per year during the next 10 years. The net return per unit is $2. The manufacturing process requires the purchase of a machine costing $140 000. The machine has an economic life of 10 years and a of $20 000 after 10 years. Major overhauls of the machine require outlays of $20 000 after 4 years and $40 000 after 7 years. Should Eagle invest in the machine if it requires a return of 12% on its investments?
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...