An asset with an original cost of $100,000 and a current book value of $20,000 is sold for $50,000 as part of a capital budgeting project.The company has a tax rate of 30%.This transaction will have what impact on the project's initial outlay?

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The gain on the sale is $30,000 ($50,000 sale price - $20,000 book value). The tax on the gain is $9,000 ($30,000 gain x 30% tax rate). The after-tax cash flow from the sale is $41,000 ($50,000 - $9,000). The impact on the project's initial outlay is a reduction of $15,000 ($50,000 - $35,000).

An Asset with an Original Cost of $100,000 and a Current