A firm is considering a capital project for which the following information is available: An existing piece of equipment that would be disposed of to make room for new equipment has a historical cost of $360,000. It has a salvage value of $10,000 and has been depreciated on a straight-line basis for 16 of the estimated 18 years of its useful life. The new equipment has a cost of $500,000 and the firm expects it will have to devote $20,000 in cash and $24,000 in accounts receivable to the new project. The firms effective tax rate is 40%. The required net initial investment in the new project is

Why isn't the salvage value subtracted from the investment in calculating the depreciation rate; in other words (360,000 - 10,000) / 18 = $19,444, instead of 360,000 / 18 = 20,000?