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Why is depreciation and amortisation added back

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Reference no: EM132803042

Peter would like to know more about the cash flows in a company. He asked Eric, the Finance Manager of the company the following questions:-

Problem A. When there are projects with different useful lives, what are the two methods of comparing the projects?

Problem B. Why is depreciation and amortisation added back when calculating free cash flows generated by a project?

Problem C. What difficulties are associated with valuing real assets compared to financial assets?

Problem D. Explain under what circumstances the NPV and IRR could provide different decisions.

Reference no: EM132803042

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