Depreciation Is Not Included in Net Present Value Analysis Because

question 37

Multiple Choice

Depreciation is not included in net present value analysis because it is:

• A) a fixed cost.
• B) a non-cash item.
• C) an historic cost.
• D) a variable cost.

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Definitions:

Fixed Costs

Business expenses that are not affected by the level of goods or services produced by the business, such as rent, salaries, and insurance.

Price-Taking

A market condition where individual buyers or sellers have no influence over the price of a product due to its abundance in the market and the presence of many competitors.

Bushel

A unit of volume that is used primarily in agriculture, equivalent to about 35.24 liters in the U.S. for dry goods.

Break-Even Price

The market price at which a firm earns zero profits.