A building owner is planning a renovation to an existing building, at an MARR of 12%. As part of this renovation, they have two options: a) Retain the current HVAC equipment, which has a current market value of $12,000. Its operating costs next year will be $3750, and these costs will increase by 35% each year. Its salvage value will decrease by 20% each year. b) Obtain a new, more energy-efficient HVAC system at a cost of $18,000. It will have operating costs of $3300 in the first year, which will increase by 30% each year afterwards. Its salvage value will decrease by 24% each year.

Do the following:

a) Determine whether the current system should be replaced now.

b) Determine the replacement strategy considering a 3-year service life.