Depreciation Must Be Considered When Evaluating the Incremental Operating Cash

question 22

Multiple Choice

Depreciation must be considered when evaluating the incremental operating cash flows associated with a capital budgeting project because

• A)it represents a tax-deductible cash expense.
• B)the firm has a cash outflow equal to the depreciation expense each year.
• C)although it is a non-cash expense, depreciation has an impact on the taxes paid by the firm, which is a cash flow.
• D)depreciation is a sunk cost.
• E)None of the above is correct.

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