If the salvage value of equipment at the end of a project is highly uncertain, the salvage value should be ignored in capital budgeting decisions.

Question

Quizplus · Accepted Answer

The salvage value should not be ignored, but rather a range of possible salvage values should be estimated and incorporated into the capital budgeting analysis to account for the uncertainty. Ignoring the salvage value can lead to incorrect investment decisions.

If the Salvage Value of Equipment at the End of a Project