An engineer is trying to decide which process to use to increase the efficiency of an oil refinery. Option 1 will cost $250,000 to buy and $85,000 per year to operate. Some components will further be replaced one time per year at a cost of $5500. Option 2 will cost $300,000 to buy and $119,000 per year to operate, but will result in a sludge hauling cost to the monofill of $37,000 per year less than that of Option 1. The useful lives are 3 and 4 years for Options 1 and 2, respectively. The salvage values are calculated for each option using the following schedule: Number of years of operation 1 2 Salvage Value 40% of Initial cost 30% of Initial cost 20% of Initial cost 10% of Initial cost 3 4 Using an interest rate of 15%, determine the better alternative by: a) Using the PW Analysis with an infinite planning horizon. (16 Points) b) Using the PW Analysis with a 10-year study period. (14 points) c) Using the AW Analysis considering the useful life of each alternative. Comment on the results. (10 Points) An engineer is trying to decide which process to use to increase the efficiency of an oil refinery. Option 1 will cost $250,000 to buy and $85,000 per year to operate. Some components will further be replaced one time per year at a cost of $5500. Option 2 will cost $300,000 to buy and $119,000 per year to operate, but will result in a sludge hauling cost to the monofill of $37,000 per year less than that of Option 1. The useful lives are 3 and 4 years for Options 1 and 2, respectively. The salvage values are calculated for each option using the following schedule: Number of years of operation 1 2 Salvage Value 40% of Initial cost 30% of Initial cost 20% of Initial cost 10% of Initial cost 3 4 Using an interest rate of 15%, determine the better alternative by: a) Using the PW Analysis with an infinite planning horizon. (16 Points) b) Using the PW Analysis with a 10-year study period. (14 points) c) Using the AW Analysis considering the useful life of each alternative. Comment on the results. (10 Points)