You are evaluating a new Project that requires purchasing new fixed assets Buying fixed assets typically requires you to depreciate this asset over the useful life of the asset Given this, we can also calculate the Depreciation Tax Shield (DTS) for a given period Select the best explanation of the impact DTS has on a project's cash flows Multiple Choice Depreciation is a cash expense and therefore is a negative cash event for the project DTS is a non cash expense and therefore is not included in this analysis DTS is an expense of the project and therefore has a negative cash effect on the project Depreciation reduces income and hence, taxes Therefore the DTS has a positive Cash Flow Effect on the project

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Question: You are evaluating a new Project that requires purchasing new fixed assets. Buying fixed assets typically requires you to depreciate this asset over the useful

You are evaluating a new Project that requires purchasing new fixed assets. Buying fixed assets typically requires you to depreciate this asset over the useful life of the asset. Given this, we can also calculate the Depreciation Tax Shield (DTS) for a given period. Select the best explanation of the impact DTS has on a project's cash flows...

Multiple Choice

Depreciation is a cash expense and therefore is a negative cash event for the project
DTS is a non-cash expense and therefore is not included in this analysis
DTS is an expense of the project and therefore has a negative cash effect on the project.
Depreciation reduces income and hence, taxes. Therefore the DTS has a positive Cash Flow Effect on the project.

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