A Restaurant is analyzing a project that requires $180,000 of fixed assets. When the project ends those assets are expected to have an after-tax salvage value of $45,000. How is the $45,000 salvage value handled when computing the net present value of the project?
a. reduction in the cash outflow at time zero
b cash inflow in the final year of the project
c cash inflow for the year following the final year of the project
d cash inflow prorated over the life of the project
e not included in the net present value
The solution explains the correct alternative in respect of cash flows and NPV