Cash-flow analysis: If an existing asset is sold at a gain, and the gain is taxable, then the after-tax proceeds from this transaction would be equal to:
A) Net proceeds from the sale plus the after-tax gain on the sale.
B) Net proceeds from the sale less the after-tax gain on the sale.
C) Net proceeds from the sale plus the taxes paid on the gain.
D) Net proceeds from the sale less the taxes paid on the gain.
E) The pre-tax proceeds plus taxes on the gain.

Question

Quizplus · Accepted Answer

The after-tax proceeds from the sale would be the net proceeds from the sale (sale price minus any selling expenses) minus the taxes paid on the gain. This is because the gain on the sale is taxable, which means that a portion of the proceeds will need to be set aside to pay the taxes owing. Therefore, the correct answer is D - net proceeds from the sale less the taxes paid on the gain.

Cash-Flow Analysis: If an Existing Asset Is Sold at a Gain