Hi John,
In question 98 from BPP (EE Co) why we need to assume that the proft has deducted the depreciation? Thanks for the clarification!
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EE Co
7y ago#1The payback period is always calculated using cash flows, and therefore the net cash flow each year is $2,500.
The accounting rate of return is always calculated using profits, and profits are always after subtracting depreciation from the cash flows.
I do suggest that you watch my free lectures on this (and, if necessary, the relevant lectures from Paper MA (was F2) because this is revision from Paper MA).
The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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