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Should we add depreciation value to the operation cash inflow when we calculate the payback period for the project ?
From lecture note chapter 7 example 9, there didn’t add from the answer.Payback period is based on cash flows.
If you have the cash flows then you do not add back the depreciation (it is not a cash flow!).If, on the other hand you have the profit, then you do add back the depreciation (because profit is after having charged depreciation).
The answer to that example is correct!
(You can find more free lectures on payback period in the Paper F2 section of the website, because it is revision from F2)
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