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

question 58

Multiple Choice

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

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Definitions:

Bond Interest Expense

The cost associated with borrowing money through bond issuance, representing the interest payments made to bondholders.

Income Statement

A financial document listing revenues and expenses, showing the profit or loss of a business over a specified period.

Straight-Line Amortization

A method of amortizing a bond discount or premium on a linear basis over the life of the bond or another asset.

Carrying Value

The book value of an asset or liability on a company's balance sheet, calculated as the original cost minus any depreciation, amortization, or impairment costs.