Chapter 7: Net Present Value and Capital Budgeting

* Remember that, when calculating the salvage value, tax liabilities or credits are generated on the difference between the resale value and the book value of the asset. Since the capital asset is depreciated over five years, yet sold in the year 4, the book value at the time of sale is $400,000 (= $2,000,000 – $1,600,000). ................
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