Final answer:
The after-tax cash flow from the sale of the asset is the sale price plus the tax savings, which amounts to $113,200. To calculate this, a loss of $20,000 was determined and then the tax savings due to this loss were calculated at the company's marginal tax rate of 21%, resulting in tax savings of $4,200.
Step-by-step explanation:
To determine the after-tax cash flow of the sale of a fixed asset, one must first identify the loss or gain on the sale. In this case, the asset was sold for $109,000 when its book value was $129,000, which resulted in a loss of $20,000. The tax effect of this loss can reduce the company’s taxable income, thereby decreasing its tax liability.
Since the company's marginal tax rate is 21%, the tax savings from the sale would be the loss amount multiplied by the tax rate. This is calculated as:
Loss on Sale = Book Value - Sale Price
Loss on Sale = $129,000 - $109,000
Loss on Sale = $20,000
Tax Savings = Loss on Sale × Tax Rate
Tax Savings = $20,000 × 21%
Tax Savings = $4,200
Thus, while the company recognizes a loss from the sale, the actual cash flow effect is reduced by the tax savings. The final after-tax cash flow from the sale is the sale price of the asset plus the tax savings, which is:
After-tax Cash Flow = Sale Price + Tax Savings
After-tax Cash Flow = $109,000 + $4,200
After-tax Cash Flow = $113,200
The final answer will be the whole number value of the after-tax cash flow, which is $113,200, rounded if necessary.