Puck Company received $18,000 cash from the sale of a machine that had a $13,000 book value. If the company is subject to a 30% income tax rate, the net cash flow to use in a discounted-cash-flow analysis would be:

Question

Quizplus · Accepted Answer

The gain on the sale is $5,000 ($18,000 - $13,000). The tax on the gain is $1,500 ($5,000 x 30%). The net cash flow is $18,000 - $1,500 = $16,500.

Puck Company Received $18,000 Cash from the Sale of a Machine