Asked by Jocelyn Bello-Paez on Jul 04, 2024
Verified
In calculating the "investment required" for the project profitability index, the amount invested should not be reduced by any salvage recovered from the sale of old equipment.
Investment Required
The total amount of capital needed to undertake a specific project, purchase, or investment.
Project Profitability Index
A calculation used to determine the relative profitability of a project by dividing the present value of future cash flows by the initial investment cost.
Salvage Recovered
The amount of money or value received from selling off the remains of assets after their useful life is over or after a casualty loss.
- Scrutinize how working capital influences the estimation of project profitability and investment requisites.
Verified Answer
KM
kevin mabiriziJul 09, 2024
Final Answer :
False
Explanation :
In calculating the "investment required" for the project profitability index, the amount invested should indeed be reduced by any salvage value recovered from the sale of old equipment, as this effectively reduces the net investment needed for the project.
Learning Objectives
- Scrutinize how working capital influences the estimation of project profitability and investment requisites.