Which one of these statements related to depreciation is correct for a firm with taxable income of $$237,500$ and aftertax income of $$187,625?$

Multiple Choice

Depreciation is a noncash expense that increases the firm's cash flows.

Depreciation decreases both the firm's net income and its cash flows.

Depreciation lowers the firm's net income but does not affect its cash flows.

Depreciation increases the net book value of the firm's assets.

Depreciation has no effect on either the firm's net income or its cash flows.