Question

Salvage value: You are involved with a project that is expected to last 50 years and have a salvage value of $10 million. A consultant has advised your company that an expenditure of only $100,000 at the end of every 5 years will double the salvage value. Your company generally uses a (minimally acceptable rate of return) MARR of 15%—do you buy the consultant’s recommendation?

Answer 1

Please note for expenditure future worth is calculated for expenditure from year 5 and thereafter every 5 year but not at the end of 50 year as at the end of 50 year useful life ends.