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 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 initial outlay equals ________.

$41,100

$38,800

$44,100

$38,960