- February 25, 2022 at 7:27 am #649308shaunak22Participant
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In the question point no 2 -An investment equivalent to the amount of depreciation to keep its non-current asset base at the present productive capacity. The current depreciation charge already included in the operating profit margin is 25% of the non-current assets of $50 million
if you please check the solution to this question appendix 1 they have investment in additional no current asset
DOUBT- why have they subtracted depreciation since the question 2nd point they have told us that depreciation is already incluaded in operating profit margin and they have also told us the same amount of investment is need to keep the asset at the current level so when finding out the cashflow we add back depreciation and subtract investment since both the investment amount and dep amount is same so the net effect should have been zero why have they subtracted?February 25, 2022 at 9:21 am #649318John MoffatKeymaster
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They are two separate things.
The TAD has not been added back because there was an equal amount needed to maintain the non-current assets (note 2).
In addition they have bought new non-current assets (note 3) which reduces the cash available.
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