Louwers Corporation recently sold a used machine for $50,000.The machine had a book value of $75,000 at the time of the sale.What is the after-tax cash flow from the sale,assuming the company's marginal tax rate is 25 percent?

Question

Quizplus · Accepted Answer

The after-tax cash flow is calculated by considering the tax impact of the loss on sale. The loss is $75,000 - $50,000 = $25,000. The tax shield from the loss is $25,000 * 25% = $6,250. Therefore, the after-tax cash flow is $50,000 + $6,250 = $56,250.

Louwers Corporation Recently Sold a Used Machine for $50,000