NPV is computed by deducting initial investment amount from the present value. Here, after salvage, initial investment amount is $2,675,000 as computed below and present value at 14% is $3,431,000 as computed in previous part of this question. Present value of cash outflows is $2,975,000 that is given in the question. Particulars Amount ($) Cash out flows 2,975,000 (-) Salvage value 300,000 Initial Investment 2,675,000 The project’s NPV would be lower or higher, when salvage is $300,000.

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Chapter 12, Problem 11F15

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NPV is computed by deducting initial investment amount from the present value. Here, after salvage, initial investment amount is $2,675,000 as computed below and present value at 14% is $3,431,000 as computed in previous part of this question. Present value of cash outflows is $2,975,000 that is given in the question.

Particulars Amount ($)
Cash out flows 2,975,000
(-) Salvage value 300,000
Initial Investment 2,675,000

The project’s NPV would be lower or higher, when salvage is $300,000.

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