The Las Vegas Transit Authority operates buses on different inter-city routes. The management is considering upgrading its fleet of 50 standard buses (purchased at $8 million), which has a book value of $3 million. It expects to sell the existing fleet for $4 million and purchase a new fleet at a cost of $12 million. The existing revenue of the fleet is $4 million per annum, which is expected to rise by 25% per annum if the new fleet is introduced. The existing operating cost of the fleet is $2 million, which is expected to drop by 30% after up-gradation.

Determine if replacement is a good idea if the company's weighted average cost of capital is 10% and the analysis period is 8 years. The company pays taxes at the rate of 33%, and it charges depreciation on a straight-line basis.