A Power Plant needs to replace an ageing Boiler with a badly degraded efficiency, resulting in an excessive consumption of fuel; the Power Plant is expected to keep producing electric power for an indefinite period.

Plant Management issues a Request For Proposal to purchase a new Boiler, specifying the required efficiency. Three proposals are received from three competing manufacturers:

• Proposal A offers a Stainless-Steel tubing boiler with a useful life of 40 years and needing a major refurbishing every 20 years.
• Proposal B offers a Copper tubing boiler with a useful life of 30 years and needing a major refurbishing every 10 years.
• Proposal C offers a Titanium tubing boiler with a useful life of 50 years and no major refurbishing needed.

Proposals data are as follows:

Proposal A Proposal B Proposal C

Price ($) 500,000 350,000 600,000

Maintenance ($/yr) 50,000 70,000 20,000

Refurbishing ($) 60,000 50,000 0

Refurbishing interval (yr) 20 10 N/A

Fuel savings ($/yr) 30,000 30,000 30,000

Boiler useful Life (yr) 40 30 50

Salvage Value ($) 100,000 70,000 150,000

Plant Management evaluates the proposals using the following parameters and criteria:

• Yearly worth of money availability: i= 2.75%
• Assume equal replacements
• No refurbishing to be implemented at end of useful life
• Maintenance to continue including last year of useful life
• Maximize estimated annual net worth of boiler operation

Question: Which Proposal will Plant Management select?