Whether depreciation should be ignored or considered when evaluating projects. Incremental Cash Flow: Incremental cash flow means increase in the cash flow of a company from investment in new project. It means the addition in the cash flow that will generate from the future project. Depreciation: Depreciation is a non cash expense. Depreciation means the value of assets is going to reduce day by day due to use of that asset, the new assets of new technology come into force and due to tear and wear.

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Chapter 6, Problem 8CQ

Summary Introduction

To evaluate: Whether depreciation should be ignored or considered when evaluating projects.

Incremental Cash Flow:

Incremental cash flow means increase in the cash flow of a company from investment in new project. It means the addition in the cash flow that will generate from the future project.

Depreciation:

Depreciation is a non cash expense. Depreciation means the value of assets is going to reduce day by day due to use of that asset, the new assets of new technology come into force and due to tear and wear.

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