How Would the Salvage Value Be Treated in a Net

question 84

Multiple Choice

How would the salvage value be treated in a net present value calculation?

• A) Disregard the salvage
• B) As a positive cash flow in the final year that the asset is used
• C) As a negative cash flow in the final year that the asset is used
• D) As a negative cash flow in the first year that the asset is used

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Definitions:

Ordinary Annuity

A series of equal payments or receipts that occur at the end of each period for a fixed duration.

Compounded Annually

Describes the method by which the interest earned on an investment is calculated and added to the principal balance once per year, leading to an increase in the amount of future interest.

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Semiannual Interest

Interest that is paid or calculated twice a year, often used in bond payments.