Problem:
An asset with an original cost of $100,000 and a current book value of $20,000 is sold for $50,000 as part of a capital budgeting project. The company has a tax rate of 30%. This transaction will have what impact on the project's initial outlay?
- reduce it by $20,000
- reduce it by $50,000
- reduce it by $6,000
- reduce it by $15,000
Note: Provide support for your rationale.