Question 2: Taiping Bakery is considering purchasing new ovens to replace an existing one that has a book value of $35,000 and can be sold today for $20,000. The old ovens are being depreciated on a straight-line basis, and its estimated salvage value 4 years from now is zero. The proposed new ovens are expected to increase sales by $50,000 and reduce operating costs by $8,000 per year. The increase in sales and reduction in its operating costs are expected to be constant during the project's life. The proposed new ovens have a 4-year life, with an invoice price of $150,000 and it can be sold for an expected $10,000 at the end of the fourth year. Additional cost of $10,000 is required for installation of the proposed new ovens. The proposed new ovens would be depreciated over its 4-year life on a straight-line basis with a salvage value of S10,000. Investment in working capital is expected to be $8,000 which is expected to be recovered at the end of the project's life. Taiping Bakery is in the 30% tax bracket and its expected WACC is 16%. Should Taiping Bakery proceed with the replacement? [Hint: Use the NPV and IRR criteria] Total: 20 marks