Depreciation Must Be Considered When Evaluating the Incremental Operating Cash

question 29

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) depreciation has an impact on the taxes paid by the firm, which is a cash flow.
• D) depreciation is a sunk cost.
• E) depreciation is a cash flow that doesn't change.

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