Three years ago a chemical processing plant installed a system at a cost of $ $20,000$ to remove pollutants from waste water that is discharged into a nearby river. The present system has no present salvage value and will cost $$14500$ to operate next year, with the operating cost expected to increase at the rate of $$500$ per year thereafter.

A new system has been designed to replace the existing system at a cost of $$10000.$ The new system is expected to have first year operating of $$9000$ with these costs increasing at the rate of $$1000$ per year. The new system is estimated to have a useful life of $12$years. The salvage values of both the system at any future time are expected to be zero. If the interest rate is $12\%$ conduct replacement analysis based on the economic life of the asset.