JameisCrabLegs Inc., a seafood distributor in the State of Florida, with a 34% combined income tax rate is considering an investment of $10,000 in equipment, having depreciable life of 3 years.
The company uses the MACRS depreciation with the following depreciation rates for 3-year class: 33.33% in Year 1, 44.45% in Year 2, 14.81% in Year 3, and 7.41% in Year 4.
The projected before-tax cash flows are: -$10,000 in Year 0, $2,000 in Year 1, $8,000 in Year 2, $17,600 in Year 3, and $13,760 in Year 4.
What is the taxable income in Year 3?