a b Depn = 10 Years

BV of E 100 33 a b
NI 10 10 10 3.3
ROE 10% 30%

Inflation 10% Ersatz a b difference

Years 1 BV of E $10 $3 $7
Multiplier 1.1 NI $1 $1
Yearly $10.00 $3.30 How much your depreciation understates
20 years later
a b
BV of E $110 $36 basically, end up with 17m more over 10 year period
NI $11 $11 If business purchased at 10x earnings, 1.7%/year
Total NI Earned
$11.00 $11.00
- Ersatz $1.00 $7.70
ROE 10% 30%

T 1 2 3 4 5 6 7 8
Asset 200

Equity 100
NI 10
Extra Reinvestment
eciation understates replacement cost by?

year period

9 10