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Linda_us, Finance, Accounts & Homework Tutor
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Experience:  Post Graduate Diploma in Management (MBA)
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Suppose you sell a fixed asset for $115,000 when its book value

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Suppose you sell a fixed asset for $115,000 when its book value is $135,000. 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)?
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I am Linda and I will try my best to help you with your question today.

Here is your solution

Loss on Sale = 135000-115000= 20000

Tax Benefit due to loss = 20000*39% = 7800

Effect on Cash flow = 115000+7800 = $122800

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Customer: replied 4 years ago.


KADS, Inc., has spent $390,000 on research to develop a new computer game. The firm is planning to spend $190,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $49,000. The machine has an expected life of three years, a $74,000 estimated resale value, and falls under the MACRS 7-year class life. Revenue from the new game is expected to be $590,000 per year, with costs of $240,000 per year. The firm has a tax rate of 40 percent, an opportunity cost of capital of 13 percent, and it expects net working capital to increase by $95,000 at the beginning of the project.

What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)

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Was the answer not correct?
Customer: replied 4 years ago.

I apologize I'm use to it being good at the front is was correct. How do I ask another question

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Customer: replied 4 years ago.

did you get the other question

Customer: replied 4 years ago.
Relist: Inaccurate answer.
Yes I got it and working on it.

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