When analyzing a potential project, depreciation costs become important because

Question

When analyzing a potential project, depreciation costs become important because _______.

Question 24 options:

depreciation costs themselves are cash flows.

depreciation costs allow firms to allocate a large expenditure over a long period of time.

depreciation cost saves income taxes, which is a relevant cash flow.

depreciation costs increases the project costs over a longer period of time.

depreciation costs themselves are cash flows.

depreciation costs allow firms to allocate a large expenditure over a long period of time.

depreciation cost saves income taxes, which is a relevant cash flow.

depreciation costs increases the project costs over a longer period of time.

Explanation / Answer

Answer:

Depreciation cost becomes important because depreciation costs allow firms to allocate a large expenditure over a long period of time. It allows a company to write off the value of an capital assets over its estimated useful life in a systematic manner, and it is a non cash transaction.

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