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Hi tutor, I have a question 58 Cantor (6/14, amended) in BPP kit.
Why the NOPAT is not included depreciation although the question does not state if this depreciation is economic depreciation or accounting depreciation. But I think that it is likely the accounting depreciation as it is recorded in financial statement, so it should be add backed to calculated NOPAT.
Hope to receive your explanation, thanks tutor a lot !
The normal adjustment is to add back book depreciation and deduct economic depreciation. Often, for simplicity in questions, you will be told that these are equal so that there is no net adjustment.
If you are not told that explicitly then you have to assume they are equal……there is nothing else you can do. Simply adding back the book depreciation would be incorrect because there will almost certainly be economic depreciation that should be taken into account.
More recent question are more explicit on this point.
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