Riverwaters Recovery Center is a private, voluntary, nonprofit drug addiction treatment and rehabilitation center. As of its annual reporting statement for this fiscal year, the facility has placed $1,200,000 in a fund to renovate the facility and provide upgrades in the detox and cleansing ward. Currently, the accumulated depreciation for the 10-year-old facility is $1,800,000.

Assume the capital assets for Riverwaters Recovery Center are inflating at 6 percent annually. Given this background information, what balance of cash would the organization need to set aside today in order to meet its replacement needs, if it will not be using any form of debt financing?

Be sure to show any calculations performed, and discuss how you reached your answer.