If the Market Value of an Asset Exceeds the Book

question 19

Multiple Choice

If the market value of an asset exceeds the book value of that asset, then the sale of the asset will:

• A) Generate taxable income.
• B) Result in a capital loss.
• C) Cause a cash outflow for the firm.
• D) Cause net profits to decline.
• E) Cause operating cash flows to decrease.

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Definitions:

Account

A record or statement of financial expenditure and receipts relating to a specific period or purpose.

Effective Rate

The actual interest rate an investor receives or pays after the effects of compounding interest and all charges are considered.

End-Of-Month Payments

Payments that are due at the end of each month, commonly found in loan and lease agreements.

Finance Company

A business that provides loans to individuals or other businesses and generates profit from the interest on these loans.