When calculating the net cash flow in a project's expected final year,
A)recovery of any working capital invested is disregarded
B)the after-tax salvage value of any project equipment is considered
C)the remaining principal on any borrowed funds is considered
D)the sales proceeds from any land associated with the project is disregarded

Question

Quizplus · Accepted Answer

When calculating the net cash flow in a project's expected final year, the after-tax salvage value of any project equipment is considered. This is because the salvage value represents the cash inflow generated by selling the equipment at the end of its useful life. However, recovery of any working capital invested is not considered in the calculation, as it is assumed that the working capital was already recouped during the project's life. The remaining principal on any borrowed funds is also not considered, as it is not a cash flow but rather a liability to be paid off. Similarly, sales proceeds from any land associated with the project are not relevant, as they would be accounted for separately from the project's operations.

When Calculating the Net Cash Flow in a Project's Expected