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Economic consistency of salvage value definitions

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  • Pierre Haessig

    (IETR - Institut d'Électronique et des Technologies du numéRique - UR - Université de Rennes - INSA Rennes - Institut National des Sciences Appliquées - Rennes - INSA - Institut National des Sciences Appliquées - CentraleSupélec - CNRS - Centre National de la Recherche Scientifique - Nantes Université - pôle Sciences et technologie - Nantes Univ - Nantes Université)

Abstract

This short report analyzes the definition of the salvage value of a component within an wider project investment analysis. The analysis shows that the classical definition is close but not exactly consistent from an economic point of view. For an exact economic consistency of the salvage value, we derive an alternate definition using a more complex formula. This formula is equivalent to the classical definition when the discount factor is zero up to second order factors.

Suggested Citation

  • Pierre Haessig, 2023. "Economic consistency of salvage value definitions," Working Papers hal-04097092, HAL.
    • Handle: RePEc:hal:wpaper:hal-04097092
    Note: View the original document on HAL open archive server: https://hal.science/hal-04097092
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