You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck. The truck's basic price is R20,000, and it will cost another R10,000 to modify it for special use by your firm. The truck falls uses straight-line depreciation and it will be sold after three years for R20,000. Use of the truck will require an increase in net working capital (spare parts inventory) of R2,000. The truck will have no effect on revenues, but it is expected to save the firm R20,000 per year in before-tax operating costs, mainly labour. The firm's marginal tax rate is 40 percent. What is the incremental operating cash flow in Year 1?

Select one:

a.R18 254

b.R20 121

c.R17 820

d.R21 737

e.R16 000