Sale of an Asset for Less Than Book Value Creates

question 71

Multiple Choice

Sale of an asset for less than book value creates a loss which reduces the company's taxes by an amount equal to ____ times ____.

• A) one-half the loss, the company's marginal tax rate
• B) the loss, one minus the company's marginal tax rate
• C) one-half the loss, one minus the company's marginal tax rate
• D) the loss, the company's marginal tax rate

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Definitions:

Inflation

How quickly the average price of goods and services elevates, lessening the power to purchase.

APR

Annual Percentage Rate, the annual rate charged for borrowing or earned through an investment, which includes all fees and costs associated with the transaction.

Mortgage Rate

The interest rate charged on a mortgage loan, determined by the lender, which affects the monthly payments and total amount paid over the life of the loan.

Annualized (Geometric)

Refers to a method of converting short-term rates of return into longer-term rates that account for the effect of compounding over a full year.