Suppose you sell a fixed asset for $112,000 when its book value is $112,000. If your company's marginal tax rate is 39 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?

Question

Quizplus · Accepted Answer

Since the asset is sold at its book value, there is no gain or loss on the sale, so no tax is owed. Therefore, the entire sale amount of $112,000 is the after-tax cash flow.

Suppose You Sell a Fixed Asset for $112,000 When Its