A company is deciding when to replace its old equipment. The equipment's current salvage value is $2,700,000 and its current book value is $1,625,000. If not sold, the old equipment will require maintenance costs of $675,000 at the end of the year for the next five years. Depreciation on the old equipment is $325,000 per year. At the end of five years, it will have a salvage value of $120,000 and a book value of $0.

Replacement equipment costs $4,300,000 now and requires maintenance costs of $345,000 at the end of each year during its economic life of five years. At the end of the five years, the new equipment will have a salvage value of $710,000. It will be fully depreciated by the straight-line method.

In five years, replacement equipment will cost $3,300,000, and the company will need to purchase this equipment regardless of what choice it makes today. The corporate tax rate is 23 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to generate tax shields from depreciation.

Calculate the NPV for the new and old equipments