Calvin Inc. is considering the purchase of a new state-of-art machine to replace its hand-operated machine. Calvin's effective tax rate is 40%, and its cost of capital is 12%.Data regarding the existing and new machines are presented below.

                                            Existing    New

                                            Machine   Machine

Original cost                                $50,000   $90,000

Installation costs                                   0     4,000

Freight and insurance                              0     6,000

Expected end salvage value                        0          0

Depreciation method                    straight-linestraight-line

Expected useful life                       10 years     5 years

The existing machine has been in service for seven years and could be sold currently for $25,000.  Calvin expects to realize a before-tax annual reduction in labor costs of $30,000 if the new machine is purchased and placed in service.

If the new machine is purchased, the incremental cash flows for the fifth year would amount to

A. $30,000

B. $26,000

C. $18,000

D. $24,000