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Which one of the following statements concerning cash flow determination for capital budgeting purposes is not correct?
Suggested Answer: B
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Tax depreciation is relevant to cash flow analysis because it affects the amount of income taxes that must be paid. However, book depreciation is not relevant because it does not affect the amount of cash generated by an investment.
12 comments · newest first
TR
Tresa
11 months ago
Wait, are we really considering book depreciation? That seems off.
FI
Filiberto
12 months ago
D is crucial, can't ignore working capital changes.
RE
Reena
12 months ago
C is spot on, sunk costs are irrelevant!
IS
Isaiah
12 months ago
I disagree with B, book depreciation shouldn't affect cash flow.
CL
Clemencia
1 year ago
A is definitely correct, tax depreciation matters!
TR
Tresa
1 year ago
I definitely recall that net working capital changes are crucial for cash flow forecasts, so D should be correct.
AF
Afton
1 year ago
I feel like we had a practice question about sunk costs, and I think they shouldn't be included in cash flow calculations. So, C seems right.
LA
Laticia
1 year ago
I'm not entirely sure about book depreciation. I thought it was important for net income, but maybe not for cash flow?
RO
Ronald
1 year ago
I remember we discussed how tax depreciation impacts cash flows, so I think A is correct.
GA
Gail
1 year ago
I'm pretty familiar with RSVP-TE, so I think I can handle this one. Let me think through the options carefully.
TU
Tuyet
1 year ago
Hmm, I'm a bit unsure about this one. I know access tokens are used for authentication, but I can't recall the exact expiration time. I'll have to think this through carefully.
JE
Jessenia
1 year ago
Hmm, I'm a bit unsure about this one. There are a few options that seem relevant, but I'm not entirely sure which one is the "most important" reason. I'll have to think it through carefully.