EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 10, Problem 10PROB
Summary Introduction
Profit or loss is the difference of the sale value of asset and book value when the asset is sold.
Calculate the tax on profit or loss as follows:
After tax cash flows are the cash flows remaining after payment of tax.
TEC is selling its assets with book value of $6,000 for $4,000. Tax rate is 35%.
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The Kings Inn Resort purchased three delivery carts 5 years ago. The delivery carts initially cost $60,000 and are depreciated on a straight line basis over 10 years. The effective tax rate for the company is 40%.
Part A: What is the net cash flow if they sell the used carts for $36,000?
Part B: What are the net cash flows if they sell the used carts for $30,000?
Part C: What is the net cash flow if they sell the used carts for $25,000
Pebble Co. recently sold a used machine for P40,000. The machine had a book value of P60,000 at the time of the sale. What is the after-tax cash flow from the sale, assuming the company's marginal tax rate is 20 percent?
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