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Good day, i was just studying discounted cash flow and came across a question where depreciation was added to annual cash flow and another where it was ignored completely because it’s not a cash item. I would like someone to shed some light on the situation, and how to tackle such questions.
Depreciation is not a cash flow and therefore if you are given the profits each year (as I am guessing is the case in your first example) then you need to add back the depreciation to get the cash flows. If that does not sort it out for you then you are going to have to tell me the exact wording of the question.
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