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

Question

Quizplus · Accepted Answer

When the salvage value is less than the book value, the firm incurs a loss on the sale, which can be used to offset taxable income, resulting in a tax benefit and thus a positive cash flow from taxes.

If the Salvage Value, at the Time of an Asset