Question: Cuda Marine Engines, Inc. must develop the relevant cash flows for a replacement capital investment proposal. The proposed asset costs $50,000 and has installation costs

Cuda Marine Engines, Inc. must develop the relevant cash flows 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-taxearnings before depreciation, interest and taxes (EBIDT)of $15,000 per year. The firm has a 40 percent tax rate.

4) The cash flow pattern for the capital investment proposal is ________.

A) a mixed stream and conventional. (HOMEWORK VERIFIES THAT THIS IS NOT THE CORRECT ANSWER)

B) a mixed stream and non-conventional.

C) an annuity and conventional.

D) an annuity and non-conventional.

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