capital budgeting Reading 28 EOC Q#1

For the expansion projects while calculating NPV, why is book value not considered for the depreciation and also in the TNOCF formula. If the salvage value for the equipment is say 40,000. Ideally, this must be the book value of the instrument. At least while calculating depreciation, this must be used isn’t it?

the book value is zero because it has been fully depreciated. you pay tax on the 85K gain and add back WC inv to get TNOCF

Yes I agree. I missed this on the first read. Thanks!

happens to me all the time!