Changes in capital spending are not incorporated directly into capital budgeting problems because the amounts are included in the operating cash flows through the inclusion of depreciation expense.

Question

Quizplus · Accepted Answer

Capital spending changes are directly incorporated into capital budgeting problems as initial outlays or investments, not through operating cash flows or depreciation. Depreciation affects tax calculations but does not represent a cash outflow itself.

Changes in Capital Spending Are Not Incorporated Directly into Capital