Question

End of Chapter Key Concept 10 -1 - PowerBuilt Construction is considering whether to replace an existing bulldozer with a new model. If the new bulldozer is purchased, the existing bulldozer will be sold to another company for $85,000. The existing bulldozer has a book value equal to $100,000. What will be the net after-tax cash flow that is generated from the disposal of the existing bulldozer? PowerBuilts' marginal tax rate is 35 percent. 10-1 Selling price = $85,000 Book value = $100,000 Gain on sale of bulldozer = $85,000 - $100,000 = -$15,000 Tax on sale of bulldozer = -$15,000(0.35) = -$5,250 (effectively a tax refund) After-tax cash flow from sale = $85,000 + $5,250 = $90,250

          End of Chapter Key Concept
10 -1 - PowerBuilt Construction is considering whether to replace an existing bulldozer with a new
model. If the new bulldozer is purchased, the existing bulldozer will be sold to another company for
$85,000. The existing bulldozer has a book value equal to $100,000. What will be the net after-tax cash
flow that is generated from the disposal of the existing bulldozer? PowerBuilts' marginal tax rate is 35
percent.
10-1
Selling price = $85,000
Book value = $100,000
Gain on sale of bulldozer = $85,000 - $100,000 = -$15,000
Tax on sale of bulldozer = -$15,000(0.35) = -$5,250 (effectively a tax refund)
After-tax cash flow from sale = $85,000 + $5,250 = $90,250

End of Chapter Key Concept
10 -1 - PowerBuilt Construction is considering whether to replace an existing bulldozer with a new
model. If the new bulldozer is purchased, the existing bulldozer will be sold to another company for
85,000. The existing bulldozer has a book value equal to100,000. What will be the net after-tax cash
flow that is generated from the disposal of the existing bulldozer? PowerBuilts' marginal tax rate is 35
percent.
10-1
Selling price = 85,000
Book value =100,000
Gain on sale of bulldozer = 85,000 -100,000 = -15,000
Tax on sale of bulldozer = -15,000(0.35) = -5,250 (effectively a tax refund)
After-tax cash flow from sale =85,000 + 5,250 =90,250

Added by Luis Miguel L.

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