Question

The break-even salvage value of a particular project is the salvage value necessary to: a. offset any losses incurred by the subsidiary in a given year. b. achieve a zero net present value for the project. c. offset any losses incurred by the MNC overall in a given year. d. make the project have zero profits. e. get a good price for what's left of the asset.

Answer 1

Answer:

b. achieve a zero net present value for the project.

Explanation:

Break-even point at the level of activity where a project or a business makes no profits or losses. It is the point where revenues match costs. The break-even salvage value of a particular project is the level where the projects return equal to the required rate of return. Therefore, the project does not create losses, nor does it make profits.

In the Net present Value analysis, a project will have positive, zero , or a negative net present value. A zero present value, the required rate of return of the projects match the discount rate, which is the expected rate of return. The break-even salvage value is, therefore, the level where the net present value is zero.