Unformatted text preview: erence
between the old asset’s sale proceeds and any applicable taxes or tax refunds
related to its sale. The proceeds from sale of old asset are the net cash inflows it provides. This amount is net of any costs incurred in the process of removing the asset.
Included in these removal costs are cleanup costs, such as those related to removal
and disposal of chemical and nuclear wastes. These costs may not be trivial.
The proceeds from the sale of an old asset are normally subject to some type of
tax.3 This tax on sale of old asset depends on the relationship among its sale price,
initial purchase price, and book value, and on existing government tax rules. 3. A brief discussion of the tax treatment of ordinary and capital gains income was presented in Chapter 1. 366 PART 3 Long-Term Investment Decisions book value
The strict accounting value of an
asset, calculated by subtracting
its accumulated depreciation
from its installed cost. EXAMPLE Book Value
The book value of an asset is its strict accounting value. It can be calculated...
View Full Document