Top$-$Ten Inc. is considering replacing its existing machine that is used to produce

musical CDs$.$ This existing machine was purchase $2$ years ago at a base price of

$$80,000.$ Installation costs at the time for the machine were $$4,000.$ The existing

machine is considered a $3-$year class for MACRS. The existing machine can be sold

today for $$40,000$ and for $$20,000$ in $3$ years. The new machine has a purchase price

of $$70,000$ and is also considered a $3-$year class for MACRS. Installation costs for the

new machine are $$4,000.$ The estimated salvage value of the new machine in $3$ years

is $$30,000.$ This new machine is more efficient than the existing one and thus

savings before taxes using the new machine are $$5,000$ a year. The company's

marginal tax rate is $20\%$ and the cost of capital is $12\%.$ For the new machine project,

What is the project incremental recurring Cash Flows $($RCF$)$ in year $2?($RCF is also

known as operating cash flow or net cash flow$).$

MACRS Fixed Aunual Expense Percentages by Recovery Class

For your answer, round to the nearest dollar, do not enter the $ sign, use commas to

separate thousands, use a negative sign in front of first number is the cash flow is

negative $($do not use parenthesis to indicate negative cash flows$).$ For example, if

your answer is $$3,005\mathrm{.}87$ then enter $3006$ ; if your answer is $$1,200\mathrm{.}25$ then enter

$-1200$

For this project, the incremental recurring cash flow in year $2$ is:

Your Answer: