Big-Pear Corp. is considering replacing its existing equipment that is used to produce smart cell phones. This existing equipment was purchase 2 years ago at a base price of $50. Installation costs at the time for the machine were $7. The existing equipment is considered a 5-year class for MACRS. The existing equipment can be sold today for $60 and for $30 in 4 years. The new equipment has a purchase price of $100 and is also considered a 5-year class for MACRS. Installation costs for the new equipment are $7. The estimated salvage value of the new equipment in year 4 is $70. This new equipment is more efficient than the existing one and thus savings before taxes using the new equipment are $15 a year. Due to these savings, inventories will see a one time reduction of $3 at the time of replacement. The company's marginal tax rate is 40% and the cost of capital is 12%. For this project, what is the incremental cash flow in year 3? MACRS Fixed Annual Expense Percentages by Recovery Class Year 3-Year 5-Year 7-Year 10-Year 15-Year 1 33.33% 20.00% 14.29% 10.00% 5.00% 2 44.45% 32.00% 24.49% 18.00% 9.50% 3 14.81% 19.20% 17.49% 14.40% 8.55% 4 7.41% 11.52% 12.49% 11.52% 7.70% 5 11.52% 8.93% 9.22% 6.93% 6 5.76% 8.93% 7.37% 6.23% 7 8.93% 6.55% 5.90% 8 4.45% 6.55% 5.90% 9 6.56% 5.91% 10 6.55% 5.90% 11 3.28% 5.91% 12 5.90% 13 5.91% 14 5.90% 15 5.91% 16 2.95% For your answer, round to the nearest $.01, do not enter the $ sign and use a negative sign in front of first number is the cash flow is negative (do not use parenthesis to indicate negative cash flows). For example, if your answer is $34.32 then enter 34.32. If your answer is -$12.25 then enter -12.25 not (12.25). For this project, the incremental cash flow in year 3 is: