Statemmt I: Depreciation is a non-cash expense; however, it is an important part of determining incremental cash flows because it reduces the interest expense paid by the firm.
Statement 2: If we use the double-declining balance method of depreciation for tax purposes, the NPV of the project we are considering should be higher than if we use the straight-line method.
A. Both correct
B. First is incorrect, second is correct.
C. First is correct, second is incorrect.