In the payback method,depreciation is added back to net operating income when computing the annual net cash flow.

Name: In the payback method,depreciation is added back to net operating income when computing the annual net cash flow.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense that reduces net income but does not actually represent an outflow of cash. Therefore, it is added back to net operating income when computing the annual net cash flow under the payback method.

In the Payback Method,depreciation Is Added Back to Net Operating