Which of the Following Statements Concerning Depreciation and Capital Budgeting

question 7

Multiple Choice

Which of the following statements concerning depreciation and capital budgeting is true?

• A)Depreciation can reduce cash outflows through savings in income tax.
• B)The tax effects of depreciation are mostly irrelevant as capital budgeting analysis is generally done with before tax information.
• C)Some depreciation charges can affect cash flows both directly and through effects on income tax.
• D)Because depreciation is a non-cash item,it can never affect cash flows.

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