Question: 1. If depreciation is an expense, why is it added back to an investment's net income to compute the net cash flow from that investment?
2. Z-Tech mistakenly produced 10,000 defective cell phones. The phones cost $60 each to produce. A salvage company will buy the defective phones as they are for $30 each. It would cost Z-Tech $80 per phone to rework the phones. If the phones are reworked, Z-Tech could sell them for $125 each. Compute the incremental net income from reworking the phones.