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

question 74

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 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)$80,700
• B)$110,700
• C)$77,300
• D)$84,800

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Definitions:

Going-Private Transaction

A process in which a publicly traded company is transformed into a privately owned entity, often through a buyout.

Borrowed Money

Funds obtained through loans or credit from financial institutions or individuals, typically requiring repayment with interest.

Poison Pill

A defensive strategy used by companies to thwart hostile takeovers by making the company less attractive to the potential acquirer.

Shareholders

Individuals or entities that own shares in a company, making them partial owners with certain rights and responsibilities.