I am stumped on why Sep 2015 Q3 (UK) has the correct solution for the NPV calculation as including the depreciation amount, when depreciation is not a cashflow.
Elsewhere in the forums we have also seen that you ignore depreciation: https://www.acted.co.uk/forums/inde...m-april-2010-question-number-20-part-i.11807/
If we change the MCQ slightly so that the machine does not increase reported profit and is effectively a useless piece of junk (just by way of argument), including depreciation will mean that NPV = -40 + 8v + 8v^2 + ... + 8v^5, or almost 0 at discount rates close to 0%. Units are in $'000
However shouldn't the NPV for the completely useless project be NPV = -40 if it doesn't produce any cashflow?
Thanks, hope somebody can elaborate as I'm puzzled!
Last edited by a moderator: Sep 10, 2018