The Chang Company is considering the purchase of a new machine to replace an obsolete one. The proposed replacement machine will perform so much more efficiently that Chang engineers estimate it will decrease cash outflows by $9000 per year. The new machine cost $40,000 delivered and installed and has an estimated economic life of 10 years. The new machine will be depreciated using the 5 Year MACRS class life. The firm's discount rate is 10% and its marginal tax rate is 35%. What is the predicted operating cash flow in year 2?

1)

$9,000

2)

$4,000

3)

$6,050

4)

$10,330