QUESTION 40 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; depreciation for years through 6 is 20%, 32%, 19% 12%, 12%, and 5%, respectively. 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 have already been taken. The new equipment is expected to result in increased incremental profits before depreciation and taxes (EBDIT) of $22,600 per year. The firm has a 40 percent tax rate. Assume no change in net working capital. The initial investment equals $41,100 $44,100 $38,800 $38,960