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If a depreciable asset is sold:
A) there is no tax consequence.
B) the sale price minus the book value is added to the firm's income and is taxed at the firm's long term capital gain tax rate.
C) the sale price is added to the firm's income and is taxed at the firm's marginal tax rate.
D) the sale price minus the book value is added to the firm's income and is taxed at the firm's marginal tax rate.
E) the sale price minus the book value is added to the firm's income and is taxed at the firm's average tax rate.
Depreciable Asset
An asset that loses value over time due to wear and tear, and for which depreciation can be applied in accounting to spread its cost over its useful life.
Tax Consequence
The financial effects that taxes have on various financial decisions, affecting net investment income or costs.
Marginal Tax Rate
Marginal Tax Rate is the rate at which the last dollar of income is taxed, reflecting the percentage of tax applied to your next dollar of income.
- Acquire knowledge on the role of taxes and depreciation in affecting cash flows in projects.
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Learning Objectives
- Acquire knowledge on the role of taxes and depreciation in affecting cash flows in projects.
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