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In the question mentioned, we have been asked to calculated the three year cash flow forecast with the details provided.
The question does not mention anything about replacement non current asset investment.
So as per the lecture notes can we assume that the depreciation is equal to the replacement non current asset investment?
However the suggested answer does not include the value of deprecation in for the replacement non current asset investment cash flows.
Kindly advise.
Thanks in advance
This question was set by the previous examiner. The current examiner always assumes that the depreciation is equal to the cost of maintaining the assets (the previous examiner didn’t used to make that assumption).
okay. Got it sir.
So if such type a question is asked in the current exam we can assume that the depreciation is equal to the cost of maintaining the assets (if there is no separate value given for replacement non current asset investment) and deduct it from cash flows right.
Correct 🙂
Almost certainly the examiner will have actually stated this in the question. If he hasn’t stated it in the question then still assume it (but in that case do state your assumption).
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