Depreciation Must Be Considered When Evaluating the Incremental Operating Cash

Multiple Choice

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.