EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 9, Problem 7QTD
Summary Introduction
To discuss: The reason why
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Depreciation is a noncash expense: why is it considered when estimating a project net cash flows?
(b) Although depreciation is not a cash flow item, it plays an important role in thecalculation of cash flow. Describe the impact of depreciation on a project’s cash flow.
Is after-tax cashflow still the cash inflow even if it is the sum of NOPAT and depreciation in the project?
Chapter 9 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 9.A - Prob. 1QTDCh. 9.A - Prob. 1PCh. 9.A - Prob. 2PCh. 9.A - Prob. 3PCh. 9.A - Prob. 4PCh. 9.A - Prob. 5PCh. 9 - Prob. 1QTDCh. 9 - Prob. 2QTDCh. 9 - Prob. 3QTDCh. 9 - Prob. 4QTD
Ch. 9 - Prob. 5QTDCh. 9 - Prob. 6QTDCh. 9 - Prob. 7QTDCh. 9 - Prob. 8QTDCh. 9 - Prob. 9QTDCh. 9 - Prob. 10QTDCh. 9 - Prob. 11QTDCh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - Prob. 10PCh. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Why are interest charges not deducted when a projects cash flows are calculated for use in a capital budgeting analysis?arrow_forwardWhich of the following cash flows should not be considered when evaluating a project? Changes in working capital Shipping and installation costs Sunk costs Opportunity costs Externalitiesarrow_forwardWhy should companies use a project’s cash flows rather thanaccounting income when determining a project’s NPV?arrow_forward
- “When evaluating projects, we’re concerned with only the relevant incremental after-tax cash flows. Therefore, because depreciation is a non-cash expense, we should ignore its effects when evaluating projects.” Critically evaluate this statement.arrow_forwardDiscussion:Is the added precision from including taxes and depreciation in calculating project cash flows worth the effort? Should they be included in the calculations? Please discuss and justify your answer.arrow_forwardwhich of the following should not be included in the cash flows for project analysis? Opportunity costs side effects or erosion sunk costs operating cash flows for all years The initial investment in net working capitalarrow_forward
- Should you subtract interest expense or dividends when calculating project cash flow?arrow_forwardDemonstrates the difference between depreciation costs as expenses and the cash flow generated by the purchase of a fixed asset? Give an example?arrow_forwardProvide a brief explanation of why depreciation of capital assets is considered in determining potential net income from an investment, but not included in determining the net cash flow of an investment.arrow_forward
- Which of the following is NOTa relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project? a. Shipping and installation costs. b. Cannibalization effects. c. Opportunity costs. d. Sunk costs that have been expensed for tax purposes. e. Changes in net working capital. Please explain your answer for better understanding.arrow_forwardWhat would be a business example that shows how depreciation and accelerated depreciation can affect project cash flows?arrow_forwardThe operating cash flows of a project: includes tax. none of the others is correct are equal to the project's total projected net income. decrease when net working capital increases. are unaffected by the depreciation method selected.arrow_forward
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