ABC ltd intends to acquire a new asset to replace the existing one. The new asset will cost sh 6,000,000 and it will require an installation cost of sh 400,000. The new asset has an economic life of 10 years and a salvage value of sh 800,000. The old asset has a net book value of 600,000 and the market value of the machine is sh 300,000 with a zero salvage value. The company uses straight line method of depreciation. As a result of this replacement, sales will increase from 1,200.000 to 1,700,000. In addition it will increase cost from sh 600,000 to sh 720,000 and commitment of 5 million in raw materials, 1.5 million in debtors and 4.5 million in creditors. The company tax rate is 30% and the cost of capital is 12%. Required: advise the company whether it should replace the asset