This may be good question of
conference. Actually, when we calculate present value of cash inflows or profits of previous years, we include only profit before depreciation. It means value of depreciation is not deducted from previous profit. So yes, depreciation is part of cash inflow for calculating present value of cash inflows and NPV.
Q: Why is depreciation added or not deducted out of previous profit?
Ans: Because we are interested only cash profit through our investment. Because depreciation is just decrease the value of fixed asset but in reality there is no payment of any expenses. So, our cash profit will not deducted with it.
