The owner of Polyplast, Inc., Joshua Ronen, is trying to decide what to do with a capital

Question:

The owner of Polyplast, Inc., Joshua Ronen, is trying to decide what to do with a capital of $500,000 at his disposal. Ronen is considering two options: invest the money in shares of another company or expand the capacity of his plastics plant by buying a new injection molding machine. With the first option, he expects to earn a return of 12% over the next 10 years. With the second option, he expects to make annual net cash inflow of $108,000.
The tax rate is 30%, and the machine will not have any at the end of its useful life of 10 years.

Required:
What should Ronen do?

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...