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Home Q & A Board Other Fields Homework Help Business Finance
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johnpaech johnpaech
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6 years ago
Assume that Casa Grande Farms is planning to sell the tractors after two years, when its book value is $119,988, for a total price of $180,000.  What is the effect on free cash flow in the year it is sold?
A) A cash inflow of $60,012
B) A cash outflow of $60,012
C) A cash inflow of $39,008
D) A cash outflow of $39,008
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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#1
6 years ago
C
Explanation:  C) Gain on sale = $180,000 - $119,988 = $60,012; tax on gain = 0.35 × 60,012 = 21,004
Cash inflow = $60,012 - 21,004 = $39,008
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