You are conducting a discounted cash flow analysis (DCF). You purchased an asset for $400,000 at time point zero. The asset was depreciated using straight line depreciation over a ten-year schedule. When you initially placed the asset into service, you expected the asset to have a salvage value of $0; at the end of year seven the project is suddenly cancelled due to a change in technology and the asset is sold in the open market for $175,000; the tax rate for the firm is 20%;

What is the cash flow, in time period seven, as a result of this transaction?

Multiple Choice

• The firm will record an inflow of $171,000

• None of the above

• The firm will record an inflow of $100,000

• The firm will record an inflow of $166,000

• The firm will record an inflow of $173,000