Is an depreciation is in flow of funds are out flow of Funds????

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depreciation non-cash expense. however, if trying account cash flows purposes of capital budgeting decision, depreciation expense provides tax shield (a tax benefit - i.e savings). example, if initial investment $100,000, piece of equipment, , use 5 year, straight-line depreciation no salvage value, depreciation expense $20,000 per year. if tax rate 30%, taxes reduced $20,000 * 0.30 = $6,000 per year. $6,000 accounted cash inflow in calculating npv capital budgeting decision.

hope helps.



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