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 $50,000. 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 $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 $5,000. The estimated salvage value of the new equipment is $80,000. This new equipment is more efficient than the existing one and thus savings before taxes using the new equipment are $15,000 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 1?

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 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 1 is: