Alpha Beta Company, Inc., a manufacturer of toys, is considering replacing an existing piece of equipment with a more sophisticated machine. The firm pays $40$ percent taxes on ordinary income and capital gains. Given the following information, calculate the incremental after$-$tax cash flow $($relevant cash flows$)$ in year $1.$

Existing Machine

Cost $=30314$

Purchased $2$ years ago

Depreciation using straight$-$line method depreciation each year$)$

Useful life $=5$ years

Current market value $=\{B\}$

Annual cash flows $=12907$

Proposed Machine

Cost $=111132$

Installation $=5700$

Depreciation using straight$-$line method depreciation each year$)$

Useful life $=5$ years

Annual cash flows $=42989$

Note: Read the question carefully. Use one decimal place. Insert numbers only. The weight of this question is two marks.

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