a) A lumber company that cuts fine woods for cabinetry is evaluating whether it should retain the current bleaching system or replace it with a new one. The relevant costs for each system are known or estimated. Use an interest rate of 10% per year to perform the replacement analysis.

Current System New System First cost 7 years ago, $ 450.000 0 First Cost, $ 0 -700,000 Remaining life, years 5 10 Current market value, $ 50,000 0 Annual Operating Cost, $ per year -160,000 -150,000 Future salvage, $ 0 50.000 -ve value shows cash outflow whereas +ve value shows cash inflow