Stone Corporation 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 companys marginal tax rate is 20 percent?

CAPITAL BUDGETING

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Stone Corporation 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?

A	P40, 000
B	P60, 000
C	P44, 000
D	P32, 000

Explanation:

Detailed explanation-1: -A discount rate is the rate of return used to calculate the present value of a cash flow. The discount rate is used to determine the present value of a future cash flow, which is the sum of the present value of each individual cash flow in the series.

Detailed explanation-2: -The Net Present Value (NPV) method involves discounting a stream of future cash ows back to present value. The cash ows can be either positive (cash received) or negative (cash paid).

Detailed explanation-3: -There are several components that must be identified when looking at incremental cash flows: the initial outlay, cash flows from taking on the project, terminal cost or value, and the scale and timing of the project.

Detailed explanation-4: -Capital budgeting decisions are a part of the overall financial management process for a firm. Decisions like constructing a new factory, purchasing heavy machinery for production or making a significant investment in an outside business entity are examples of Capital Budgeting.

There is 1 question to complete.

ECONOMICS

COST ACCOUNTING

CAPITAL BUDGETING