Your company is considering the purchase of a new machine. The original cost of the old machine was $100,000; it is now five years old, and it has a current market value of $40,000. The old machine is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $50,000 and an annual depreciation expense of $10,000. The old machine can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new machine whose cost is $80,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new machine are $13,000 a year over its full MACRS depreciable life. Depreciation is computed using MACRS over a five-year life, and the cost of capital is 10 percent. Assume a 21 percent tax rate. What will the year 1 operating cash flow for this project be? Multiple Choice

A. $2,200

B. $4,900

C. $11,530

D. $14,200