Question

does depreciation of machinery & salvage value be used in calculating net present value profit and loss and cash flow statement

Answer 1

Ans: Yes

Depreciation calculation on machinery can be used while calculation part of net present value. why depreciation calculation is important net present values contains both returns and investment of particular project, for initial calculation for arriving net profit for tax purpose we should deduct depreciation provision from profits and after charging tax depreciation provision what we deduct from above profits it should be added back to profits for arriving net returns.

Salvage value is also plays important role in while calculating NPV. Salvage value is a value which we get when asset is transferred at the end of the project.It is nothing but return to the organisation at the end of the project.while calculating net present value we should consider all returns and investments.

So, Depreciation and Salvage value should be used in calculation net present value.