Salvage Value & Wear and Tear Explained with EXAMPLES | CAPITAL BUDGETING

In this lesson, we explain how we account for tax in capital budgeting by going through examples on depreciation and tax allowance as well as recoupment and salvage value.
We explain how wear and tear allowance (depreciation for tax purposes) is calculated in capital budgeting, we explain what salvage value (Recoupment) is, how it is calculated, and how it is treated in capital budgeting. We also explain and go through an example of the formulas for calculating the tax value of an asset, after-tax salvage value, wear and tear, and wear and tear tax shield.

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