A diesel generator is needed to provide auxiliary power in the event that the primary source of power is interrupted. Various generator designs are available, and more expensive generators tend to have higher reliabilities should they be called on to produce power. Estimates of reliabilities, capital investment costs, operating and maintenance expenses, market value, and damages resulting from a complete power failure (i.e., the standby generator fails to operate) are given in Table PI 2-7 for three alternatives. If the life of each generator is 10 years and MARR = 10% per year, which generator should be chosen if you assume one main power failure per year? Does your choice change if you assume two main power failures per year? (Operating and maintenance expenses remain the same.)

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TABLE P12-7 Three Generator Designs for Problem 12-7 Cost of Market Alternative Investment Expenses/Year Reliability Power Failure Value $400,000 $40,000 25,000 38,000 Capital 0&M $200,000 170,000 214,000 $5,000 7,000 4,000 0.96 0.95 0.98 400,000 400,000