Provisions for recovering capital invested in income-producing assets are made by charging depreciation against current income.
Depreciation charges are not actual cash flows.
Engineering economic analysis needs to take into consideration the depreciation methods that can be used by the organization.
References
Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996
Originally posted in
http://knol.google.com/k/narayana-rao/depreciation-and-income-tax/2utb2lsm2k7a/256
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