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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!
The 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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