If Depreciation Expense in Year One of a Project Increases

question 152

Multiple Choice

If depreciation expense in year one of a project increases for a highly profitable company,

• A) net income decreases and incremental free cash flow decreases.
• B) net income increases and incremental free cash flow increases.
• C) the book value of the depreciating asset increases at the end of year one.
• D) net income decreases and incremental free cash flow increases.

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Definitions:

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A legal doctrine that an act, by its nature, is inherently dangerous and can lead to liability without the need to prove negligence.