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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

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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 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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