valuation?, page-10

You have a point. True earnings in a particular year may be understated if there is a mismatch between depreciation rates and the useful life of equipment. The ROE calculations that I have run have been over the period commencing FY07, so the continuing earnings of any written off equipment should be reflected in the ROE calculation (eventually). FY07 - FY10 may not be a large enough sample to assess that. If anything this may result in a slight uptick of the company's ROE over time, as the business grows. For example, if I halve the expected depreciation charge for FY11 my ROE goes from 11% to 14% - a slight improvement and may be sufficient to push my long term ROE from mid teens to high teens, but not by enough to justify a purchase at current prices.