Evaluate the Capital Investment

Old Backhoes

New Backhoes

Purchase cost when new

$90,000

$200,000

Salvage value now

$42,000

Investment in major overhaul needed in next year

$55,000

Salvage value in 8 years

$15,000

$90,000

Remaining life

8 years

8 years

Net cash flow generated each year

$30,425

$43,900