You are considering replacing a current machine with a new machine that has an 8-year life. The purchase price of the new machine is $635,000 and transportation/installation expenses will be $100,000. This new machine falls into the 5-year MACRS classification for depreciation purposes. At the end of that 8-year life of the new machine, it is expected to have a market value of $260,000. The current equipment has been in use for 7 years and has an expected remaining life of 8 years. Seven years ago, you purchased the equipment for a total of $485,000. You are depreciating this current equipment on a straight-line basis to an expected $110,000 salvage value for accounting purposes. You estimate the market value of the equipment to be $264,000 currently and $127,000 at the end of 8 years. You estimate that inventories will increase by $58,000 and accounts receivable will increase by $65,000 with the purchase of the new equipment. If you continue to operate the old machine, you estimate that you can produce and sell 124,000 units per year at a selling price of $6 per unit. Variable costs associated with running the old machine are $1.93 per unit, and fixed costs associated with the old machine are $118,500 annually. If you switch to the new machine, you anticipate that you can produce and sell 142,500 units at a selling price of $8 per unit. You estimate the variable costs associated with running the new machine to be $2.75 per unit, while estimated fixed costs are $130,425 annually. Assume your firms cost of capital is 10% and that your firms marginal tax rate is 20%. Depreciation for Tax Purposes: Modified Accelerated Cost Recovery System (MACRS) Ownership Year 5-year 1 20% 2 32% 3 19% 4 11.5% 5 11.5% 6 6% Question 1: Should you replace the old piece of equipment with the new one under consideration? Substantiate your answer using NPV, IRR, and MIRR.