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Sir in calculating free cashflow if department b – ndedge co
Why are we decducting depreciation from EBIT instead of adding ?
Is it coz it’s given in the question it can be assumed that tax allowable depre is the same as investment needed to maintain operations ?Yes – it is because of note (vi) in the question.
Although the depreciation itself is not a cash flow, the same amount is needed to maintain operations and this is a cash flow.
It is something that the current examiner always assumes, even if it is not stated in the question, as I explain in my free lectures on investment appraisal.
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