2. You are evaluating a project regarding replacement of the existing facilities. Old machinery and equipment bought 4 years ago with an expected life of 10 years. The turn-key price was 1,200,000, market value is 475,000 and zero salvage value. New machinery equipment has a price of 3,500,000, customs duties are 15% of the price, installation requires 210,000, life is 6 years, cost of capital 12% and tax rate is 25%. New system will increase sales by 2,500,000 of which 70% is gross margin. Operating expenses other than depreciation will increase by 135,000. ACP is 60 days, inventory turnover is 5 times, and AP will increase by 100,000. Should the replacement be made? Use NPV for decision making.