For capital budgeting evaluation of replacement projects, the computation of aft

Question

For capital budgeting evaluation of replacement projects, the computation of after-tax operating cash flows for each project (i.e., existing versus proposed) is compared to arrive at incremental cash flows. This calculation requires that both depreciation expense and financing costs must be excluded from the operating cash inflows received. True For capital budgeting evaluation of replacement projects, the computation of after-tax operating cash flows for each project (i.e., existing versus proposed) is compared to arrive at incremental cash flows. This calculation requires that both depreciation expense and financing costs must be excluded from the operating cash inflows received. True False

Explanation / Answer

False. As we include the depreciation expense while calculating the incremental cash flow.

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