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700321
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Joined: 26 Aug 2009
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Posted: 29 Aug 2009 at 17:16 \| IP Logged

Does any of these methods ignore salvage value?

Payback

discounted payback

NPV

IRR

ARR

I think the first 4 recognize only the tax shield of depreciation correct?

thanks

kj_nyc
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Joined: 05 Jun 2009
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Posted: 29 Aug 2009 at 17:55 \| IP Logged

Correct, so the first 4 ignore salvage because salvage is ignored when computing depreciation for tax.

JLcpa
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Posted: 15 Feb 2010 at 12:53 \| IP Logged

Does everyone agree with the above 2 posts? I think apart from Payback period, all other methods include salvage value in their computation

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EAK5455
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Posted: 15 Feb 2010 at 16:59 \| IP Logged

I agree. The payback period, for some reason, doesn't consider the salvage value as opportunity cost, I guess. The other four methods all
consider the salvage value a cash flow which offsets investment outlay.

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JLcpa
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Posted: 18 Feb 2010 at 07:56 \| IP Logged

Thank EAK. Good Luck with BEC!

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