question archive Suppose you sell a fixed asset for $99,000 when its book value is $129,000
Suppose you sell a fixed asset for $99,000 when its book value is $129,000
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Suppose you sell a fixed asset for $99,000 when its book value is $129,000. If your company's marginal tax rate is 39%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)
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Answer :- After-tax cash flow of sale = Cash Received on Sale of Asset + Tax Benefit on Sale of asset
= $99,000 + 39%(129,000-99,000)
= $110,700
Note :- Tax Benefit will be provided since the said asset has been sold in loss of $30,000 and which will give tax benefit of$11,070.
