Rossiter Restaurants is analyzing a project that requires $180,000 of fixed assets.When the project ends,those assets are expected to have an aftertax salvage value of $45,000.How is the $45,000 salvage value handled when computing the net present value of the project?
A)reduction in the cash outflow at time zero
B)cash inflow in the final year of the project
C)cash inflow for the year following the final year of the project
D)cash inflow prorated over the life of the project
E)not included in the net present value

Question

Quizplus · Accepted Answer

The salvage value is considered as a cash inflow in the final year of the project. This is because at the end of the project, the fixed assets will be sold and generate cash inflow, which will contribute to the project's overall profitability.

Rossiter Restaurants Is Analyzing a Project That Requires $180,000 of Fixed