What is the salvage value in the context of equipment purchase?

Salvage value refers to the estimated residual value of an asset at the end of its useful life. In the context of equipment purchase, it represents the expected amount that can be recovered after the equipment has been fully utilized. This market value is crucial for financial analysis, as it impacts the calculation of depreciation and the overall cost of ownership. By considering salvage value, businesses can better assess the long-term financial implications of their investments in equipment.

In this scenario, while the other options touch on different aspects of equipment ownership and financial assessment, they do not accurately define salvage value. Maintenance costs pertain to ongoing expenses rather than the asset's end-of-life value. The initial purchase price minus depreciation does not specifically reflect salvage value but rather the book value of the equipment. Income generated from the equipment relates to revenue generation rather than its residual value after use. Understanding the distinction helps in calculating return on investment and making informed financial decisions regarding asset management.