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 $90,000 and uses 36,000 gallons per 1,000 hours of operation at the average load encountered in passenger service. System B costs $290,000 and uses 31,000 gallons per 1,000 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 15% salvage values. If jet fuel costs $1.89 a gallon (year 1) and fuel consumption is expected to increase at the rate of 5% per year because of degrading engine efficiency, which engine system should the firm install? Assume 4,000 hours of operation per year and a MARR of 14%. Use the AE criterion. What is the equivalent operating cost per hour for each engine? Assume an end-of-year convention for the fuel cost. Click the icon to view the interest factors for discrete compounding when MARR = 14% per year. Single Payment Compound Present Compound Sinking Present Amount Worth Amount Fund Worth Equal Payment Series Capital Recovery Factor Factor Factor Factor Factor Factor N (F/P, i, N) (P/F, i, N) (F/A, i, N) (A/F, i, N) (P/A, i, N) (A/P, i, N) 1 1.1400 0.8772 1.0000 1.0000 0.8772 1.1400 2 1.2996 0.7695 2.1400 0.4673 1.6467 0.6073 3 1.4815 0.6750 3.4396 0.2907 2.3216 0.4307 4 1.6890 0.5921 4.9211 0.2032 2.9137 0.3432 5 1.9254 0.5194 6.6101 0.1513 3.4331 0.2913 7 8 10 6649 o 2.1950 0.4556 8.5355 0.1172 3.8887 0.2572 2.5023 0.3996 10.7305 0.0932 4.2883 0.2332 2.8526 0.3506 13.2328 0.0756 4.6389 0.2156 3.2519 0.3075 16.0853 0.0622 4.9464 0.2022 3.7072 0.2697 19.3373 0.0517 5.2161 0.1917