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--106 A problem often discussed in the engineering economy literature is the oil-well pump prob- lem. Pump 1 is a small pump; Pump 2 is
--106 A problem often discussed in the engineering economy literature is the "oil-well pump prob- lem." Pump 1 is a small pump; Pump 2 is a larger pump that costs more, will produce slightly more oil, and will produce it more rapidly. If the MARR is 20%, which pump should be selected? Assume that any temporary external invest- ment of money earns 10% per year and that any temporary financing is done at 6%. Year Pump 1 ($000s) Pump2 ($000s) 0 1 2 --$100 +70 +70 -$110 +115 +30
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