Which of the following statements is true? 1. A capital budgeting project's incremental net income computation for purposes of determining incremental tax expense includes immediate cash outflows for initial investments in equipment. 2. When a company invests in equipment, it is not ordinarily allowed to immediately expense the entire cost of the equipment when computing taxable income. 3. Depreciation expense is not included in the computation of incremental net income when determining the income tax expense associated with a capital budgeting project. 4. Under the simplifying assumptions made in the text, to calculate the amount of income tax expense associated with an investment project, first calculate the incremental net cash inflow during each year of the project and then multiply each year's incremental net cash inflow by the tax rate.

Which of the following statements is true? 1. A capital budgeting project's incremental net income computation for purposes of determining incremental tax expense includes immediate cash outflows for initial investments in equipment. 2. When a company invests in equipment, it is not ordinarily allowed to immediately expense the entire cost of the equipment when computing taxable income. 3. Depreciation expense is not included in the computation of incremental net income when determining the income tax expense associated with a capital budgeting project. 4. Under the simplifying assumptions made in the text, to calculate the amount of income tax expense associated with an investment project, first calculate the incremental net cash inflow during each year of the project and then multiply each year's incremental net cash inflow by the tax rate