I came across an investment case where I had to calculate ROI. For the fixed costs they took into account a depreciating factor. So instead of plugging in the original fixed cost value of $25m into the ROI calculation, it worked out to be instead (125m/20)* 3 years.
This has left me quite confused. When should apply this into ROI calculations and when shouldn't I?
Hi there,
I think this is an interesting question that may be relevant for many people. I would be happy to share my thoughts on it:
If you would like a more detailed discussion on how to address your specific situation, please don't hesitate to contact me directly.
Best,
Hagen
Hi there,
This case is a bit more “complex” than most. In fact, this is the correct way to truly amortize/depreciate and asset.
BAsically, you should do it this way when the case/interviewer tells you to do it this way :)
You can predict it if they've bought some sort of asset and indicated it has a “life” of x years.
