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Sir,
Aren’t we at a very fundamental level accounting for depreciation
by deducting the capital investment
(from cashflow)at the year zero?If this is true..Is the very reason why we don’t include the depreciation as relevant cash flow to avoid double effect..?
Or is it due to the principles of relevant costing (i.e cashflow )
The reason that we do not include depreciation is that it is not a cash flow. For NPV investment appraisal we are only ever interested in cash flows.
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