Suppose you sell a fixed asset for 79000 when its book value

Suppose you sell a fixed asset for $79,000 when it\'s book value is $88,000. If your company\'s marginal tax rate is 15%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?

Solution

Loss on sale=(88000-79000)=$9000

Hence effect on cash flow=Sale proceeds+(Loss on sale*Tax rate)

=$79000+($9000*15%)

which is equal to

=$80350.