In What Manner Does Depreciation Expense Affect Investment Projects

question 89

Multiple Choice

In what manner does depreciation expense affect investment projects?

• A) It reduces cash flows by the amount of the depreciation expense.
• B) It increases cash flows by the amount of the depreciation expense.
• C) It reduces taxable income by the amount of the depreciation expense.
• D) It reduces taxes by the amount of the depreciation expense.

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Definitions:

Novation

The substitution, by mutual agreement, of another party for one of the original parties to a contract.

Liability

The state of being legally responsible for something, particularly in terms of debts or legal obligations.

Certificate of Authority

An official document granting a company the right to do business in a jurisdiction beyond where it was originally incorporated.