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Dear Tutor,
In the NPV of this question they deducted Fixed costs and also deducted Depreciation to arrive at the PBT. In my attempt I had assumed depreciation is included in the given fixed costs, and so I did not deduct it. Is there an assumption I should be aware of, or I should try and always state mine?
Thank you.
I assume that you are referring to the tax allowable depreciation. This only ever appears when calculating the tax – it does not appear in the actual accounts and is certainly not a cost to the company.
It will help you to watch the Paper F9 lectures on investment appraisal with tax.
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