Suppose You Sell a Fixed Asset for $99,000 When Its

question 7

Multiple Choice

Suppose you sell a fixed asset for $99,000 when its book value is $129,000. If your company's marginal tax rate is 39%, 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) $80,700
• B) $110,700
• C) $77,300
• D) $84,800

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Definitions:

Direct Manufacturing Cost

Expenses directly tied to the production of specific goods, including materials and labor.

Relevant Range

The range of activity within which the assumptions about fixed costs and variable unit costs are valid for purposes of budgeting and decision-making.

Direct Costs

Expenses that can be directly traced to the production of specific goods or services, such as raw materials and labor.

Period Costs

Expenses that are not directly associated with the production process and are expensed in the period they are incurred.