Question: Corporation is performing its operating cash flow analysis for a proposed expansion project for the firm. When calculating the operating cash flows for each year

Corporation is performing its operating cash flow analysis for a proposed expansion project for the firm. When calculating the operating cash flows for each year of operation, the firm deducts depreciation in order to calculate taxes for the year, and then adds it back to the net operating profit after taxes. Why did Corporation not simply leave depreciation unaffected in its analysis?

A. Depreciation is a non-cash charge.
B. Depreciation is tax deductible.
C. Depreciation does not represent cash flowing out of the firm so if Corporation were to not add it back in, it would not truly represent the amount of cash the firm is generating by conducting the proposed expansion.
D. Both B and C are correct.
E. A, B, and C are correct.

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