A debt-free firm has a net income of $71,600, taxes of $31,500, and depreciation of $11,000 so the net cash flow is $78400
Depreciation refers to two aspects of the same concept: first, the actual decrease in the fair value of the asset, such as the decrease in the value of plant equipment each year as it is used. and depreciation, and secondly, the allocation on the statement of the historical cost of the asset over the useful life of the asset (allocation according to the principle of attachment).
Thus, depreciation is the decrease in value of an asset and the method used to reallocate or "depreciate" the cost of a tangible asset (such as equipment) over its useful life. its use. Companies depreciate long-lived assets for accounting and tax purposes.
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