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:

a.Perform the replacement analysis. Calculate AW defender and AW of the challenger. Which should be the selection?

b.What is the definition of Replacement Value?

c.Determine the minimum resale price (Replacement Value for the current process) needed to make the challenger replacement choice now.