Net salvage value

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Net salvage value

The after-tax net cash flow for terminating the project.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Net Salvage Value

In accounting, an estimate of the after-tax value of an asset at the end of its depreciation. For example, a firm's computer depreciates each year. When it breaks down or becomes obsolete, it has a net salvage value; it is calculated by the best guess of the net cash inflow when it is sold at the end of its life after taxes.

In price regulated industries, the salvage value may be a negative value because it includes the net cash outflow in removing the asset from where it was used. For example, nuclear energy plants must store the nuclear waste at the end of their useful life. This cost is a contributing factor in the salvage value. In such a case, the net salvage value is zero. See also: Absolute physical life, Obsolescence.
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