[Maseketo]

Thanks very much John Moffat

so in other words our depreciation of the old machine will be 45000-5000/12=3333.33

my other question would be on salvage. In some books salvage of the old machine is ignored when discounting the terminal cash flow(like in this case only the salvage of the new “30000” would be discounted). While have seen others subtracting salvage of the old from the salvage of the new(meaning in this case they would only discount 25,000 that is 30,000-5,000
so which one is the normal way of dealing with salvage of the old machine when discounting the cash flows?
thanks once more

[Maseketo]

How should we calculate the depreciation of the old machine in this question. should we assume that since the machine has 3 quarters depreciated it has also stayed for 3 quarters. meaning are we going to say since the remaining years is a quarter, which is 12 years the other remaining years to balance should be 36 years such that when we add 12+36 we get 48 and use it as total number of years to calculate the depreciation. i don’t understand the “3 quarter depreciated” meaning

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