In calculating the net present value of an investment in equipment, the required investment and its residual value should be subtracted from the present value of all future cash inflows.

Question

Quizplus · Accepted Answer

In calculating the net present value (NPV) of an investment in equipment, the required investment is subtracted from the present value of all future cash inflows, but the residual value of the equipment is typically added to the cash inflows, as it represents an additional inflow at the end of the equipment's useful life.

In Calculating the Net Present Value of an Investment in Equipment