Suppose the initial capital cost of a new piece of equipment was $250,000 and the old piece of equipment was sold at a salvage value of $20,000.If the net initial outlay was -$235,000,then the depreciated value of the old asset must have been ______ the salvage value.

Question

Quizplus · Accepted Answer

The net initial outlay is calculated as the initial capital cost minus the salvage value of the old equipment. Since the net initial outlay is -$235,000, it implies that the depreciated value of the old asset was greater than the salvage value, resulting in a gain on the sale of the old equipment.

Suppose the Initial Capital Cost of a New Piece of Equipment