A construction company specialised in motor highway construction has to decide whether to restore a “tractor with scraper” or to…

A construction company specialised in motor highway construction has to decide whether to restore a “tractor with scraper” or to replace it with a new one. Five years ago the existing “tractor with scraper” was bought for 52000 with an expected lifetime of 15 years. At the time of the sale the salvage value was estimated 3700 . If the company would sell the “tractor with scraper” now, the trade in value would be 22000
. The restore costs of the current machine are 7400 . After the restoration, the yearly operating cost will be 5950 . The salvage value in 10 years from now will be 2980 . A “tractor with scraper” can be bought for 59500 . The yearly operating cost is 3700 . The salvage value in 10 years from now is 30000 . The minimum required rate of return by the company is 10 %. What is the best option?

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