A company has to decide whether to purchase an electric gasoline motor to operate a pump for a water tank. Determine the model to select using an equivalent uniform annuity analysis. Use an interest rate of 8%.

Parameters Gasoline Electric

Initial Cost $2,500 $10,000

Annual Cost of Operatio $1000 first year and increasing $50 annually $460 first year and reducing $20 annually

Annual Cost of maintanance $350 $75

Residual Value $400 $750

Life of Motor 6 12