You recently began working for Orange Fizz Company and management is contemplating the replacement of its existing, three-year old botling machines originally cost $14,000,000 with newer and more efficient machines. The old, exis machines, were placed on the MACRS five-year class life depreciation schedu (assuming half-year convention) three-years ago. Total ope bottling machines are $5,400,000 per year and Orange Fizz will bottle 48 million (48,000,000) bottles per year each year for the next seven years. The firm expects to realize a $1,000,000 return from salvaging the old machines in 7 years; however, the existing machines may be sold now to another firm in the industry for $2.200,000. If Orange Fizz retains the old machines, they would remain operational for the next 7-years. rating costs for the old The new bottling machines, if purchased, would cost $16,000,000 and would be placed on a MACRS five-year class life depreciation and will remain in operation for the next 7 years. The new machines are expected to have a salvage value of $1,600,000 in seven years. Total annual savings in operating costs of S0.076 per bottle will be realized if the new bottling maichines are installed. The company is in the 26% income tax bracket and it has a 12% WACC. Determine if the replacement should occur by estimating the replacement project's NPV and IRR. Use a relative (incremental) cash flow analysis similar to what we did in class and the example problems in your text