If income taxes are ignored, which of the following choices correctly notes how a project's depreciation is treated under the net-present-value method and the internal-rate-of-return method?

Question

Quizplus · Accepted Answer

Under the net-present-value method, a project's depreciation is included in cash flow before taxes. Under the internal-rate-of-return method, a project's depreciation is not included in cash flow before taxes but is included in the calculation of the initial investment. This is because the internal-rate-of-return method calculates a rate of return based on the cash inflows and outflows of a project, while the net-present-value method calculates the present value of future cash inflows and outflows, including taxes and depreciation.

If Income Taxes Are Ignored, Which of the Following Choices