Question: Cuda Marine Engines, Inc. must develop the cash flow estimates for a replacement capital investment proposal. The proposed asset costs $50,000 and has installation costs
Cuda Marine Engines, Inc. must develop the cash flow estimates for a replacement capital investment proposal. The proposed asset costs $50,000 and has installation costs of $3,000. The asset will be depreciated using a five-year recovery schedule. The existing equipment, which originally cost $25,000 and will be sold for $10,000, has been depreciated using an MACRS five-year recovery schedule and three years of depreciation has already been taken. The new equipment is expected to result in incremental before-tax net profits of $15,000 per year. The firm has a 40 percent tax rate. The incremental depreciation expense for year 5 is A $5,110 B. $7,950 OC. $6,360 OD. $2,250
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