Your company needs to purchase a new track hoe and has narrowed the selection to two pieces

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Your company needs to purchase a new track hoe and has narrowed the selection to two pieces of equipment. The first track hoe costs $100,000 and has an hourly operation cost of $31.00 and a $35,000 salvage value at the end of three years. The second track hoe costs $65,000 and has an hourly operation cost of $36.00 and no salvage value at the end of three years. The operator cost is $29.00 per hour. The revenue from either track hoe is $95.00 per hour. Using 1,200 billable hours per year and a MARR of 20%, calculate the NPV for both track hoes. Which track hoe should your company choose?

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...
MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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