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17. 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. although it is a non-cash expense,
depreciation has an impact on the taxes paid by the firm, which is a cash flow.
d. depreciation is a sunk cost.
e. None of the above is correct.
Depreciation
is a non-cash expense. However, the depreciation expense reduces taxable
income, it affects the taxes paid (in cash) by the firm.