• The chipmill currently produces 352,000 tons chips/year and 48,000 tons fuelwood (a combination of bark, fines and oversized chips), which requires 400,000 tons of roundwood.
• You need to continue producing 352,000 tons chips/year, and either produce or purchase 48,000 tons/year fuelwood if a rechipper is installed.

• The volume of oversized chips has been measured and comprises 10% of the total fuelwood volume.
• A rechipper will produce 60% acceptable chips, with the remaining 40% going to the fuelwood stream
• Your mills incremental roundwood cost is $33.00 per ton
• Your mills incremental fuelwood cost is $21.00 per ton
• The life of a rechipper is seven years, with a value of $0 at the end of the period
• The total annual power and maintenance cost for operating a rechipper is $10,000
• The cost of the rechipper installed is $185,000.
• Your companys incremental cost of capital is 12%
• Assume zero inflation during the period
• Use straight line depreciation
• Use a tax rate of 25%.

Calculate the current fiber balance (inputs & outputs). Calculate the fiber balance with a rechipper, solving for the roundwood tons required to produce 352,000 tons chips. Calculate the volume of fuelwood which will need to be purchased to replace the lower fuelwood volume produced with a rechipper in place.