hard20 pts · first answer countsbusiness-casecash-flow-modellingdepreciation

Depreciation in a cash flow model

An analyst’s discounted cash flow model subtracts the yearly depreciation of a new machine as a cash cost, on top of the machine’s purchase price in year 0. What is wrong?

A.Nothing; depreciation is a real yearly cost to the firmB.Depreciation should be added back as a yearly benefitC.The year 0 purchase price should be removed insteadD.It double-counts: depreciation is not a cash payment

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Depreciation in a cash flow model

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