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) depreciation has an impact on the taxes paid by the firm, which is a cash flow.
D) depreciation is a sunk cost.
E) depreciation is a cash flow that doesn't change.