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please show the calculation and formula is considering purchasing a new system to improve one of its current production lines. Two types of system are

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is considering purchasing a new system to improve one of its current production lines. Two types of system are available on the market and the company plan only uses the service of either system not more than eight years. The purchase and installation of System A12 is RM11,000. The annual maintenance cost for this system is RM1,000 per year and to make sure the system run effectively, the system part has to be changed two times per year, which cost them RM100 each replacement. The system would last for four years; at which time it should have no more salvage value. System B89 will cost them RM16,000. This system has special requirement during installation. This requirement will require small renovation at the site and is estimated to be RM4,000. Useful life for this system is 8 years with the market value only 15% from initial value at the end of life. This system has special package from the supplier with free maintenance cost for two years, and annual maintenance cost start at year 3 with RM2,000 until year 8. The annual operation cost for both system shows in Table 2. In addition, the company has another option with renting a system at RM9,000 per year and amounts increasing by 5% per year which is fully maintained by the rental company. Based on the above information; (a) Suggest with justification THREE (3) alternatives available to the company to improve one of its current production line for 8 years planning with the cash flow diagram illustration (9 marks) (b) Recommend which alternatives appears to be the best at MARR is 8% per year. [Note: Show all the steps done for the recommendation] Year Table 2: Annual Operating Cost System A12 (RM) System B89 (RM) 0 700 1 2 3,000 3,000 3,000 900 1,100 3 4 5 1,300 1,500 1,700 6 7 1,900 2,100 8

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