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 $40,000. Installation costs at the time for the machine were $8,000. The existing equipment is considered a 5-year class for MACRS. The existing equipment can be sold today for $40,000 and for $20,000 in 4 years. The new equipment has a purchase price of $120,000 and is also considered a 5-year class for MACRS. Installation costs for the new equipment are $7,000. The estimated salvage value of the new equipment in year 4 is $90,000. This new equipment is more efficient than the existing one and thus savings before taxes using the new equipment are $19,000 a year.Due to these savings, inventories will see a one time reduction of $1,000 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 ClassYear3-Year5-Year7-Year10-Year15-Year1 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%

162.95%

For your answer, round to the nearest dollar, do not enter the $ sign, use commas to separate thousands, 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 $3,005.87 then enter3,006; if your answer is -$1,200.25 then enter-1,200

For this project, the incremental cash flow in year 3 is: