Question

Dixie Chicken is about to close one of its fast food franchises. As part of the closing, the firm will sell a refrigeration unit and its cooking units. The book value of the refrigeration unit is currently $18,203.00, while the book value of the cooking unit is $3,713.00. A buyer has offered $12,454.00 for the refrigerator and $6,116.00 for the cooking unit. The tax rate facing the firm is 35.00%. What is the cash flow from selling these assets

Answer 1

Answer:

$19741.10

Explanation:

Cash flow from the sale = salvage value - tax(salvage value - book value)

Salvage value is the price at which the asset is sold

The refrigerator : $12,454.00 -0.35($12,454.00 - $18,203.00) = $14,466.15

$6,116.00 - 0.35($6,116.00 -  $3,713.00) = $5274.95

Total cash flow = $5274.95 + $14,466.15 = $19741.10