2. A car circuit diagnostic system was purchased 7 years ago on an earlier contract. It has no capital recovery cost remaining. The current market value - RM 70,000, remaining lifc of 3 years, no salvage value, AOC - RM 30,000 per year. The only option for this system is to replace now or retain it for the full 3 additional years. You found that there is only one good challenger system with cost estimate: first cost - RM 750,000, life - 10 years, S-O and AOC - RM 50,000/year. You have option to retain the current system. purchase the new system and keep it for the entire 10 years for use for this contract or some other application that could recover the remaining 3 years of the invested capital. This mean 10 years for the contract work and the last 3 ycar would be the capital recovery years (challenger life is 10 years). You estimated that the first cost of this system 3 years from now is RM 900,000 and AOC - RM 50,000. The replacement study had to be conducted using interest rate of 10% for the fixed contract period of 10 years. Show your cash flow diagram for various options (Ilint: 3 options). Propose your recommendation to you CEO based on the study. - 2. A car circuit diagnostic system was purchased 7 years ago on an earlier contract. It has no capital recovery cost remaining. The current market value - RM 70,000, remaining lifc of 3 years, no salvage value, AOC - RM 30,000 per year. The only option for this system is to replace now or retain it for the full 3 additional years. You found that there is only one good challenger system with cost estimate: first cost - RM 750,000, life - 10 years, S-O and AOC - RM 50,000/year. You have option to retain the current system. purchase the new system and keep it for the entire 10 years for use for this contract or some other application that could recover the remaining 3 years of the invested capital. This mean 10 years for the contract work and the last 3 ycar would be the capital recovery years (challenger life is 10 years). You estimated that the first cost of this system 3 years from now is RM 900,000 and AOC - RM 50,000. The replacement study had to be conducted using interest rate of 10% for the fixed contract period of 10 years. Show your cash flow diagram for various options (Ilint: 3 options). Propose your recommendation to you CEO based on the study