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How do you calculate the net present value when there is incremental cost and depreciation?
Incremental means extra, and extra costs to the company are always relevant when calculating the NPV.
Depreciation is not a cash flow and is therefore not relevant when calculating the NPV.
Have you watched my free lectures? The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
Thank you
Just wanted to know because when I looked at the mock exam questions there were a few based on the Accounting method with incremental cost
I don’t know what you mean by “the accounting method”.
Net present value is only one way of appraising projects (and the most important way for the exam), and looks only at cash flows.
The accounting rate of return is another method and looks at the profitability. But this is not NPV.
Again, I do suggest that you watch the free lectures where all the methods are explained.
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