Question

8. What is depreciation? Explain how it affects the economic analysis of a new chemical process 9. Why is it advantageous to use an accelerated depreciation schedule? 10. "In general, it is better to depreciate the fixed capital investment as soon as allowable." Che

Answer 1

Solution :-

Depreciation :- It is just a reduction in the value of asset as reduction in its life or value due to use of it .

We can also say Depreciation as reduction in the value of recorded asset in books as due to reduction in market value in a very systematic manner . Depreciation is a non cash expense

It affects the economic analysis of a chemical process as Depreciation is a expense so we get a tax benefit on depreciation which leads to cash inflow or saving we say it as Depreciation tax shield . Even though depreciation is a non cash expense there is no cash flow of depreciation but due to depreciation of tax saving which indirectly leads to Saving of Cash outflow means Cash Inflow

So Depreciation affects the economic analysis

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