Miller Corporation is considering replacing a machine.

The replacement will reduce operating expenses (that is, increase revenues) by $36,000 per year for each of the 5 years the new machine is expected to last.

Although the old machine has zero book value, it can be used for 5 more years.

The depreciable value of the new machine is $148,000.

The firm will depreciate the machine under MACRS using a 5-year recovery period (see Table 3.2 for the applicable depreciation percentages) and is subject to a 40% tax rate on ordinary income.

Estimate the incremental operating cash inflows generated by the replacement.

(Note: Be sure to consider the depreciation in year 6.)