MCQ

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April 28, 2018 at 11:18 pm #449241
humai
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Payback period is the number of years that it takes a business to recover its orignal investment from net returns. Which of the following statement is true

a) It is calculated before both depreciation and tax
b) It is calculated before depreciation but after tax
c) It is calculated after depreciation but before tax
d) It is calculated after both depreciation and tax

Correct ans is B but please can you explain me
April 29, 2018 at 1:29 pm #449300
John Moffat
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Because the payback period is calculated using net cash flows. Depreciation is not a cash flow (but tax is).
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