When an asset has a salvage value of $400,000, it is not appropriate to discount it at the same rate as the other cash flows, because its discounting is proportionate throughout the periods of its life. Other cash flows, on the other hand, are higher in risks.
Salvage value can be referred to or considered as the value that determines the value of an asset at the end of a particular accounting period. This salvage value is the difference between the actual costs and the amount of depreciation charged over the asset.
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