2. Capital budgeting (replacement decision) The company is evaluating if the replacement of an old machine is economically feasible. You have the following information: Old machine: Book value today is $2 million while market value is $1.5 million Remaining economic life is 5 years Annual EBITDA is $1.5 million Book value and market value in 5 years is 0. New machine: Purchase price is $4 million Economic life 5 years Annual EBITDA is $2.3 million Book value in 5 years is 0, while market value is 0.6 million Company tax rate is 40% on both profits and capital gains. The cost of capital for the company is 8%. Questions: Your task is to find the incremental cash-flows from replacement decision and evaluate if replacement is economically feasible based on NPV