The Manufacture of Folic Acid Is a Competitive Business

question 43

Multiple Choice

The manufacture of folic acid is a competitive business. A new plant costs $100,000 and lasts for three years. The cash flow from the plant is as follows: year 1: +$43,300; year 2: +$43,300; and year 3: +$58,300. (Assume no taxes.) If the salvage value at the end of year 2 is $60,000, should you scrap the plant at the end of year 2?

• A)Yes
• B)No
• C)I don't know.
• D)More information is needed.

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