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relevance of depreciation

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Explain the importance of depreciation in the analysis of capital budgeting proposals.

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The relevance of depreciation is documented.

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The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm's investment decisions would generally include expansion, acquisition, modernization and replacement of the long-term assets. Sale of a division or business (divestment) is also as an investment decision. Deprecation means decline in value of an asset. (Management Accounting by Khan & Jain)
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