In the payback method, depreciation is deducted from net operating income when computing the annual net cash flow.

Question

Business

Collier

27 September, 07:10

In the payback method, depreciation is deducted from net operating income when computing the annual net cash flow.

+2

Answers (1)

Know the Answer?

Alyvia Delgado · Answer 1

This statement would be false. The depreciation is added back to the net income when computing the annual net cash flow in the payback method. The depreciation is a non-cash item therefore it should not be deducted from the net income when computing the cash flow.