K&M Winery has an old wine press that the company wants to replace with a more efficient press. The new press costs $110,000 with an additional $10,000 in installation costs. The old press was purchased two years ago for a cost of $60,000 and $10,000 in installation costs. It can be sold for a price of $40,000 today. The old press was depreciated under the MACRS 3-year recovery schedule while the new press will be depreciated under the MACRS 5-year recovery schedule. K&M Winery projects revenues to be $250,000 more with the new press each year for the next three years. Expenses (excluding depreciation) are 80% of sales. The firm is in the 21% tax rate.

What is the operating cash flow for year 3?

Use

Table 13.1 MACRS Depreciation Schedule

Year		Class
	3 years	5 years	7 years	10 years
1	41.67%	25.00%	17.85%	12.50%
2	38.89%	30.00%	23.47%	17.50%
3	14.14%	18.00%	16.76%	14.00%
4	5.30%	11.37%	11.97%	11.20%
5		11.37%	8.87%	8.96%
6		4.26%	8.87%	7.17%
7			8.87%	6.55%
8			3.34%	6.55%
9				6.56%
10				6.55%
11				2.46%
Total	100.00%	100.00%	100.00%	100.00%