The depreciation method used in capital budgeting is irrelevant because any depreciation not taken during the life of the project will add to the book value when assets are sold.

Question

Quizplus · Accepted Answer

The depreciation method used in capital budgeting is relevant because it affects the amount of taxable income and cash flows generated by the project during its life. The depreciation method also affects the book value of assets, which can impact the salvage value received when the assets are sold at the end of the project's life. Therefore, the choice of depreciation method can have significant implications for the financial outcomes of a capital budgeting project.

The Depreciation Method Used in Capital Budgeting Is Irrelevant Because