Table 11.3 Cuda Marine Engines, Inc. Must Develop the Relevant Cash Flows

question 79

Multiple Choice

Table 11.3
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-tax net profits of $15,000 per year. The firm has a 40 percent tax rate.
-The initial outlay equals ________. (See Table 11.3)

• A) $41,100
• B) $44,100
• C) $38,800
• D) $38,960

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Definitions:

Switch Closed

A condition in an electrical circuit where the switch is in a position that allows current to flow through.

Preset

A predetermined setting or value that is programmed into a device, allowing it to perform a certain function automatically or under specific conditions.

RTO Timer

A type of timer in industrial control systems that allows for retentive countdowns, meaning it retains the countdown value during power cycles or when in an off state.