Asked by
Gariman Gupta
on Oct 10, 2024
Verified
An increase in the expected salvage value at the end of a capital budgeting project will increase the internal rate of return for that project.
Salvage Value
The estimated residual value of an asset at the end of its useful life.
Capital Budgeting
The process of planning significant investments in projects that have long-term implications such as the purchase of new equipment or the introduction of a new product.
Internal Rate
Commonly identified as the internal rate of return (IRR), this is the discount rate that sets the net present value (NPV) of all cash flows associated with a specific project to zero.
- Comprehend the function and handling of salvage value in the appraisal of investments.
- Appreciate the impact of project features such as lifespan, salvage value, and initial cost on various investment appraisal methods.
Verified Answer
SD
Learning Objectives
- Comprehend the function and handling of salvage value in the appraisal of investments.
- Appreciate the impact of project features such as lifespan, salvage value, and initial cost on various investment appraisal methods.