Depreciation is taken into account when deducing profit (in the income statement), but ignored in NPV assessments.
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Depreciation is taken into account when deducing profit (in the income statement), but ignored in NPV assessments. If both accounting profit and NPV are meant to be decision-making tools, is this illogical?
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No it is not illogical Profit and NPV have two entirely different objectives Profit is concerned with assessing trading effectiveness for a period of time that is shorter than the typical investment projects life If some allowance for the cost of using noncurrent assets during that accounting period is to be made depreciation must be deduced and charged as an expense NPV has another objective ...View the full answer
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