In calculating the payback period where new equipment is replacing old equipment, any salvage value to be received on disposal of the old equipment should be added to the cost of the new equipment.

Question

Quizplus · Accepted Answer

The salvage value of the old equipment should be deducted from the cost of the new equipment, not added, to determine the net investment for calculating the payback period.

In Calculating the Payback Period Where New Equipment Is Replacing