A Project's Depreciation Expense Must Be Considered When Evaluating Its

Multiple Choice

A project's depreciation expense must be considered when evaluating its incremental operating cash flows because:

A) depreciation represents a tax-deductible cash expense.
B) the firm incurs a cash payment 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 fixed cash payment that the firm receives each year.