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

fiveyear

recovery schedule. The existing equipment, which originally cost $25,000 and will be sold for $10,000, has been depreciated using an MACRS

fiveyear

recovery schedule and three years of depreciation has already been taken. The new equipment is expected to result in incremental

beforetax

net profits of $15,000 per year. The firm has a 40 percent tax rate.

The book value of the existing asset is ________.

Question content area bottom

Part 1

A.

$25,000

B.

$15,000

C.

$7,250

D.

$21,250