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Depreciation is not a cash flow. Why, then, do we include depreciation when computing NPV? Depreciation reduces accounting income. Depreciation reduces tax liability, which is
Depreciation is not a cash flow. Why, then, do we include depreciation when computing NPV?
Depreciation reduces accounting income. | ||
Depreciation reduces tax liability, which is a cash flow. | ||
Depreciation spreads the initial cost of an asset (which is a cash flow) over the useful life of the asset. | ||
Depreciation is not included in NPV computations. |
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