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True or False 1. Converting project-related inventory into cash at the end of the project is...

True or False

1. Converting project-related inventory into cash at the end of the project is not a project related cash flow.

2. MACRS always depreciates assets to the equipment’s salvage value.

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Answer #1

1 FALSE :

Converting project-related inventory into cash at the end of the project is a project related cash flow as while considering the decision to whether accept the project or not we reduce the working capital amount which includes the inventory as cash outflow. And also at the end of the period we consider the same amount as the cash inflow. Here inventory is project related and hence the cash obtained from selling off inventory needs to counted as the project related itself.

2. FALSE :

MACRS depreciates the asset value to 0. Hence the salvage value is not considered. Also sum of the rates of deprecciation adds upto 100% which makes salvage value of asset irrelevant.

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