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An airline is considering two types of engine systems for use in its planes. Each has the same life and the same maintenance and repair
An airline is considering two types of engine systems for use in its planes. Each has the same life and the same maintenance and repair record. System A costs $80350 and uses 140 kL per 1000 hours of operation at the average load encountered in passenger service. System B costs $189118 and uses 108 KL per 1000 hours of operation at the same level. Both engine systems have three-year lives before any major overhaul is required. On the basis of the initial investment, the systems have 10% salvage values. Assume that the jet fuel currently costs $1.50/L and fuel consumption is expected to increase at the rate of 6% per year because of degrading engine efficiency. Assume 2000 hours of operation per year and a MARR of 10%. Use the AE criterion. a.Which engine system should the firm install? b.What is the equivalent operating cost per hour for each engine? System A: $ per hour System B: $ per hour
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