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

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Business

Sasha Frazier

2 December, 20:59

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

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Allan Macias · 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.