It is not necessary to consider depreciation in estimating cash flows for a new capital project.

Question

Quizplus · Accepted Answer

Depreciation is an important factor in estimating cash flows for a new capital project, as it affects the tax liability of the company and therefore impacts the actual cash flows received. Depreciation is a non-cash expense that reduces the book value of the asset over time, but it is still a real expense in terms of tax deductions and cash outflows for replacement or upgrades in the future. Therefore, it is necessary to consider depreciation in estimating cash flows for a new capital project.

It Is Not Necessary to Consider Depreciation in Estimating Cash