Depreciation Is Usually Not Considered an Operating Cash Flow in Capital

question 104

Multiple Choice

Depreciation is usually not considered an operating cash flow in capital budgeting because:

• A)depreciation usually does not result in an increase in working capital
• B)depreciation is usually a constant amount each year over the life of the capital investment
• C)deducting depreciation from operating cash flows would be counting the lump-sum amount twice
• D)depreciation usually has no effect on the disposal price of the machine

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Definitions:

Meteorite

A fragment of a meteoroid that has fallen to a planetary surface.

Dried Up

Refers to something that has lost all its moisture.

Natural Stain

A discoloration or marking often found on materials, caused by the chemical or physical reaction of a natural substance.

Fractures

Breaks or cracks in rocks where there has been no significant movement or displacement of the sides relative to one another.