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Which of the following statements is/are correct? Since depreciation is not a cash...

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Finance

Which of the following statements is/are correct?

  1. Since depreciation is not a cash expense, it has no effect on FCF thus no effect on capital budgeting. (this is not the answer, I got marked off).

  2. Externality can be either negative or positive factor when estimating FCF.

  3. If sunk costs are considered and reflected in a projects cash flows, then the projects NPV will be higher thus sunk cost should be included.

  4. The inclusion of an externality can never be lead to an increase in a projects NPV.

  5. The sale of the equipment when the project is completed. The tax is calculated by multiplying tax rate with the sale price of the equipment.

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