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Please refer to the following Web site for a complete explanation on how depreciation affects the cost of capital:

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โˆ™ 2006-06-17 00:18:12
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Q: How does depreciation affect the cost of capital?
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Related questions

Is depreciation included as a cash flow in capital budgeting?

No depreciation is not included as depreciation is allocation of part of assets cost to income statement while in capital budgeting, full cost of asset is already included so if depreciation will also be included then there would be double counting of same asset.

What is the cost of depreciation of capital equipment minus GNP?

Net National product

Why do Depreciation expenses affect capital budgeting analysis by increasing?

it is increasing the incremental cash flow

Is Depreciation can be calculated on capital expenditure?

Depreciation on Capital Expenditure is nothing but Depreciation on fixed assets. Cash Flow statement shows the Capex incurred during the particular time period,i.e. for Quarter or fiscal year. A CAPEX is an amount spent to acquire or improve a long term asset such as plant,equipment or buildings. Usually the cost is recorded in an account classified as Property,plant and equipment.The cost (Except for the cost of LAND) will then be charged to depreciation expense over the useful life of the asset.

Is depreciation a product dost?

Depreciation is a period cost and not a product cost as depreciation is still charged even if there is no production or sale of goods.

Is depreciation a controllable cost?

No. Depreciation would be considered an uncontrollable cost because it is fixed

Is the depriciation cost is direct cost?

Depreciation is an indirect cost as there is no separate identification in product cost that which cost is depreciation as deprecation is a overhead cost that’s why it is indirect cost.

What is the different between the cost of depreciation of a asset and its related accumulated depreciation?

Cost of depreciation assets and accumulated depreciation is same as accumulated depreciaton calculates how much depreciation is charged till date while remaining is current book value of assets.

Is Depreciation of sales equipment sales expense?

Yes you can charge those depreciation cost to cost of sales. You should try to charge the depreciation to the relevant area where feasible.

Does the journal entry for depreciation involve Cash account?

No, Depreciation is the process of allocation of fixed asset cost for it's useful revenue earning value to each fiscal year's income statement. So it does not affect cash.

Are depreciation charges implicit cost?

yes, depreciation is an implicit cost. but this implicit cost is added to total costs in calculating accounting profits.

Gradual wear on capital goods?


How does an increased depreciation expense affect tax-related cash flows?

The depreciation deduction increases the amount of after tax cash (working capital) available to the business. The additional cash is equal to the amount of tax that would otherwise be payable on the depreciation claimed. This is because depreciation is an "unfunded" expense, but is really a tax deferral which is subject to recapture in the future.

How does the cost of capital financing techniques affect the organization?


Is depreciation direct cost?

Only depreciation for all those fixed assets which directly involve in manufacturing of production volume is part of direct cost while all other depreciation is not part of direct cost and included in indirect cost classification.

Is depreciation an overhead cost?


Depreciation is called as notional cost why and explain?

Depreciation is called a notional cost because it cannot be measured in real terms.

Depreciation affect cash flow?

There is no affect of depreciation on cash flow that's why in indirect method of cash flow net income is adjusted for depreciation to calculate cash flow from operating activities.

Is the depriciation cost is variable cost?

yes..depreciation cost is the variable cost..

Is depreciation on equipment fixed or variable?

Depreciation is a fixed cost because variable cost is that cost which change with the change in the production units but it doesn't put any effect on depreciation as depreciation of the equipment will remain same no matter you produce maximum number of units or produce no unit in fiscal year.

Is depreciation of delivery truck a period cost?

Yes depreciation of delivery truck is period cost because it is not product cost as it is not require to make the units of product.

Is depreciation on a machine a period cost or product cost?

product cost

Which value chain function would include depreciation on transportation cost?

The distribution function would include depreciation on transportation cost.

What does it mean to say that depreciation expense does not affect cash?

Depreciation do not increase or decrease the cash as it is just the presentation of actual cost of assets through income statement actual cash was already reduced when asset was purchased.

Is depreciation a relevant cost?

Relevant to what? Depreciation is an accounting contrivance to diminish taxable income.