When I calculate the sum of the values, Ecomic Income is greater than Accounting Income. The wiley guide says Accounting income>Economic Income on pg 28. It doesnt make sense.
It sounds as though Basit wrote “lower” when he meant to write “higher”.
thanks. yeah, it seems like that
You’re welcome.
Wait, what is the rationale behind “economic income is always greater than accounting income”?
Who said that economic income is always greater than accounting income?
lol I forgot the Economic Income equation now.
Had to go thorugh it again just now.
I am guessing it is because interest expense is included in the calculation of Accounting Income.
In the case of Economic Income we dont take into account of the interest expense,i.e we dont subtract it explicitly. It will be shown in the discount rate.
However, I am guessing the main reason is the dep charges. Change in market value (economic dep) doesnt necessarily correspond to a constant value whereas in Dep ( provided staright-line) seems to be higher.
This is now confusing me even more. Dont we have to Subtract Interest expense to arrive at after tax-operating cash flow in the first place?
Is this thread about a specific question from Wiley? Then I rest my case.
You haven’t posited a case, much less made one.
What, exactly, are you claiming?
