Hello. I’m struggling with this part in capital budgeting session.
The cost of equipment is 5000.
Live for 4 years. The salvage value after 4 years is 600.
Okay, so I will depreciate this equipment down to zero: (5000 / 4) ? or: (5000 - 600) / 4 ???
The problem is I don’t understand the salvage value in this part.
I remember in FRA session, they calculated: (Cost - Residual value)/(estimated useful life)
but in Capital budgeting, they didn’t mention anything about that.
What should I do with this “salvage value” ?