Big-Pear Corp. is considering replacing its existing equipment that is used to produce smart cell phones. This existing equipment was purchase 3 years ago at a base price of $60,000. Installation costs at the time for the machine were $7,000. The existing equipment is considered a 5-year class for MACRS. The existing equipment can be sold today for $40,000 and for $30,000 in 3 years. The new equipment has a purchase price of $150,000 and is also considered a 5-year class for MACRS. Installation costs for the new equipment are $8,000. The estimated salvage value of the new equipment is $70,000. This new equipment is more efficient than the existing one and thus savings before taxes using the new equipment are $18,000 a year.Due to these savings, inventories will see a one time reduction of $4,000 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 1?

MACRS Fixed Annual Expense Percentages by Recovery ClassYear3-Year5-Year7-Year10-Year15-Year133.33%20.00%14.29%10.00%5.00%244.45%32.00%24.49%18.00%9.50%314.81%19.20%17.49%14.40%8.55%47.41%11.52%12.49%11.52%7.70%511.52%8.93%9.22%6.93%65.76%8.93%7.37%6.23%78.93%6.55%5.90%84.45%6.55%5.90%96.56%5.91%106.55%5.90%113.28%5.91%125.90%135.91%145.90%155.91%162.95%