1. **Problem Statement:** Calculate the net investment for replacing old equipment with new equipment. 2. **Formula for Net Investment:** $$\text{Net Investment} = \text{Cost of New Equipment} - \text{Market Value of Old Equipment} + \text{Increase in Net Working Capital}$$ 3. **Explanation:** - Cost of new equipment is the purchase price. - Market value of old equipment is the amount received from selling it. - Increase in net working capital is additional cash tied up immediately. 4. **Given values:** - Cost of new equipment = 28000000 - Market value of old equipment = 20000000 - Increase in net working capital = 5000000 5. **Calculate:** $$\text{Net Investment} = 28000000 - 20000000 + 5000000 = 13000000$$ 6. **Interpretation:** The firm needs to invest 13000000 immediately to replace the old equipment with the new one.