(a) For equipment that has a first cost of RM 10,000 and the estimated operating costs and year-end salvage values shown in Table Q3(a) below, determine the economic service life at i = 10% per year. Table Q3(a) Year Operating Cost, RM per Year Salvage Value, RM 1 -1,000 7,000 2 -1,200 5,000 3 -1,300 4,500 4 -2,000 3,000 5 -3,000 2,000 (b) (10 marks) A furniture company intends to evaluate whether they want to stick with the existing equipment (defender) or replace them with the new productive equipment (challenger). The details of the cost required are shown in Table Q3(b) below. Use an interest rate of 20% per year. Challenger Table Q3(b) Items Initial cost eight (8) years ago (RM) Market value (RM) Yearly handling cost (RM) Life time (year) Salvage value (RM) Defender 450,000 25,000 160,000 5 0 700,000 70,000 10 50,000 (i) Use the replacement analysis to determine whether the existing equipment is required to be replaced with the new equipment. (10 marks) (ii) If the existing equipment (defender) could be sold in international market, how much is the minimum value of the defender so that the challenger could replace the defender now