Suppose you sell a fixed asset for $112,000 when its book value is $112,000. If your company's marginal tax rate is 21 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)?
A) $0
B) $68,320
C) $112,000
D) $34,720

Question

Quizplus · Accepted Answer

Since the asset is sold for its book value, there is no gain or loss on the sale. Therefore, there are no taxes due on the sale, and the entire proceeds of $112,000 represent the after-tax cash flow.

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