Evaluate the following statement: If the salvage value is less than the book value of the asset at the time of an asset disposition , then the firm will effectively receive a positive cash flow from taxes on the sale.

Question

Quizplus · Accepted Answer

If the salvage value is less than the book value of the asset at the time of an asset disposition, it means that the asset is sold for less than it was originally worth. This creates a loss for the firm, which can be used to reduce the taxable income. As a result, the sale can generate a tax benefit for the firm, effectively increasing the cash flow.

Evaluate the Following Statement: If the Salvage Value Is Less