Which of the Following Statements About the Effect of Depreciation

Multiple Choice

Which of the following statements about the effect of depreciation on cash flows is correct?

A) It does not affect cash flows because it is a non-cash expense
B) It directly increases cash outflows,just like any other expense
C) It decreases cash outflows because it reduces a firm's income tax liability
D) It affects cash flows only in those cases where an investment produces future revenues