Replacement or upgrade of the computerized inventory system:

The current system is 3 years old, originally cost $1,100,000, is being depreciated on a straight-line basis over its five-year life, and has an estimated salvage value of $100,000. Although the system is being depreciated over 5 years, it could last for 5 more years. If the machine was sold today, it would be for $325,000.

The new system would cost $1,275,000, including installation costs, and would be depreciated on a straight-line basis over its five-year life to a salvage value of $125,000. Fairfield spent $100,000 last year researching this new system. This new system would reduce cash operating costs by $310,000 per year. Inventory needs are expected to increase by $70,000 immediately due to the new system, but accounts payable will rise by $15,000. At the end of the life of this machine inventory and accounts payable will reverse. Both machines will be sold at their salvage value at the end of the five-year project. Should the company recommend replacement or upgrade the system?

please provide formulas for learning