Question

Which of the following best describes the composition of
*depreciable asset* in the initial outlay calculation?

- purchase price of a new asset
- purchase price of a new asset, shipping/installation cost, initial investment in working capital, and net proceeds from the sale of the old asset
- purchase price of a new asset, shipping/installation cost, and initial investment in working capital
- purchase price of a new asset and shipping/installation cost
- none of the above

Answer #1

**Answer:- Purchase price of a new asset,
shipping/installation cost, initial investment in working capital,
and net proceeds from the sale of the old asset**

**Explanation:-**

Initial Outlay includes the following:

**Capital Investment**( Including installation and shipping costs associated with purchase of the equipment )**Initial investment in working capital**( done to cover the initial operating expenses of the project)**Salvage Value**( It is net proceeds from the sale of the old asset. It is done in cases where old equipments are sold in connection with the starting of new project)**Any gains or losses realized on the sale of older equipment**

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