The Utah 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.

Using the information provided in the scenario, calculate the net cash flows, incremental cash flows, NPV$,$ and IRR.

Analyze the findings and make a recommendation on whether or not fleet replacement is a favorable decision.