Dear Sir,
I have the question regarding the valuation of parts division in Q3 of pilot paper "Doric".
The question is why depreciation(which is not a cash flow) is deducted when free cash flow to firm is calculated?
Thank you!
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Pilot paper Q3 "Doric"
8y ago#1The question says "Annual depreciation on non-current assets is 10% and this is the amount of investment needed to maintain the current level of activity"
The depreciation is not a cash flow, but the investment needed to maintain the current level of activity is a cash flow and is of the same amount.
This is something that the current examiner regularly does in his questions.
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