What I need help with: Hello! In the solution posted below the question, I do not understand why the immediate salvage values of the old machines are considered an initial cost. It does not make sense to me because the old machines are already in use and will not be disposed of immediately, so how is the immediate salvage value considered a cost?

Question:

The local telephone company purchased four special pole hole diggers eight years ago for $14,000 each. They have been in constant use until now. Owing to an increased workload, additional machines will soon be required. Recently an improved model of the digger was announced. The new machines have a higher production rate and lower maintenance expense than the old machines but will cost $32,000 each, with a service life of eight years and a salvage value of $750 each. The four original diggers have an immediate salvage value of $2,000 each and an estimated salvage value of $500 each eight years hence. The average annual maintenance expense of the old machines is about $1,500 each, compared with $600 each for the new machines. A field study and trial show that the workload would require three additional new machines if the old machines continued in service. However, if the old machines were all retired from service, the workload could be carried by six new machines with an annual savings of $12,000 in operation costs. A training program to teach employees to run the machines will be necessary at an estimated cost of $700 per new machine. If the MARR is 9% before taxes, what should the company do?

Solution (for 4 old and 3 new alternative):

Alternative II: Keep 4 old machines and buy 3 new ones Initial Cost: Annual Maintenance =4 old ($1,500)+3 new ($600)=$7,800 per year Salvage Value 8 years hence =4 old ($500)+3 new ($750)=$4,250 Compute Equivalent Uniform Annual Cost (EUAC) Initial Cost: $106,100(A/P,9%,8)=$106,100(0.1807)=$19,172 Less Salvage Value: ($4,250)(A/F,9%,8)=$4,250(0.0907)=$385 Add Annual Maintenance: =+$7,800 EUAC=$26,587