The Manufacture of Folic Acid Is a Competitive Business

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 $40,000, would you scrap the plant at the end of year 2?

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