CudaMarine 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.

a. The book value of the existing asset is ________.

b. The tax effect on the sale of the existing asset results in ________.

c. The initial outlay equals ________.

d. The incremental depreciation expense for year 1 is ________.

e. The annual incremental after-tax cash flow from operations for year 1 is ________.

Please write down with calculation or process

MACRS RATE Recovery year 3 years|5 years 7 years 10 years 20% 32 19 12 12 33% 45 15 7 10% 18 14 12 9 14% 25 18 12 1 2 4 5 66 9 4 8 6P 6 4 10 11