An asset costs $100,000 and will generate cash benefits of $30,000 at the end of each year for 5 years for Hartford Corporation. Salvage value are $50,000, $40,000, and $0 at the end of year 3, year 4, and year 5 respectively. The required return is 10%. Assuming that this asset can be replicated, when is the optimal time to abandon the investment
We calculate the total value of the asset in all 3 options, all values are discounted to present (and I assume that you know the PV = FV/(1+r)^t ...
Hartford Corporation: When is the optimal time to abandon the asset?