This should be easy, but there is one area I just don’t understand. On page 18, Table5 The average net income is 18,000 All of the cash flows are added up and divided by 5 Why isnt the asset done the same way? it shows the average value being 200,000-0/2 instead of 5. I realize it would make the math goofy, but why is it divided by 2 to get the average value when the numerator is divided by 5 years?
It’s always (Beginning Asset Value - Salvage Value)/2 to get the average book value, regardless of how many periods. If book value is 250,000 and salvage is 50,000 then avg book value would be 200,000/2.
Durrr… ok, damn…i shoulda caught that one