Cash flows associated with a project's termination generally include the salvage value of the project plus or minus any taxable gains or losses associated with its sale.

Question

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When a project is terminated, its salvage value can be realized through its sale, which would result in cash inflows. However, the sale of the project may also result in taxable gains or losses, which would affect the net cash flows associated with the termination of the project. Therefore, both the salvage value and the taxable gains or losses need to be considered when calculating the cash flows associated with a project's termination.

Cash Flows Associated with a Project's Termination Generally Include the Salvage