An engineering design firm is considering the use of solar power for its stand$-$alone olfice. Two options are being considered: $(1)$ continue to use electric power from the grid; and $(2)$ remain connected to the grid but use solar with net metering to feed back into the grid when excess power is generated, resulting in a credittor future use. Energy rates anticipated for the upcoming year, per kilowatt$-$hour $($kwh$),$ are approximately $$0\mathrm{.}13$ tor off$-$peak pricing and $$0\mathrm{.}16$ for on$-$peak pricing. These prices are expected to increase annually at a rate of $8\mathrm{.}0\%$ and $6\mathrm{.}6\%,$ respectively. Annual demand is estimated to be $7,190kwh$ during hours considered to be $"$on$-$peak" with all being. during daylight hours when solar panels are effective. "Off$-$peak" annual demand is $7,835kwh$ when the sun is available, and $8,920kwh$ when there is lack of sun. For Option $1,$ costs include the energy charges for kwh used during on$-$and off$-$peak times, plus a monthly "sevice charge" of $$70$ simply for having access, regardless of kwh used. For Option $2,$ in addition to the monthly "service charge," a $5$ kw solar capacity with inverter, charge controller, current limiter$,$ and interfacing will be used with no storage capacity at a cost of $$27,000$; part of the demand will be provided by the solar array, and the rest $($particularly at night and when there is lack of sun$)$ will be provided by the utility company $($the grid$).$ Excess energy from the solar array will be fed back into the grid and credited back to the engineering design firm. Annual maintenance and testing will cost $$150$ the first year, increasing by $$110$ each year thereafter. The salvage value after $12$ years will be $$3,500.$ Following are the annual $kwh$ figures for each option:

For Option $1$:kwh from grid:

On Peak w$/$sun$->5620$

On Peak w$/$o sun$-->1570$

On Peak w$/$sun$->7835$

On Peak w$/$o sun$->8920$

For Option $2$:kwh from solar:

On Peak w$/$sun$->5620$

On Peak w$/$o sun$-->0$

On Peak w$/$sun$->7835$

On Peak w$/$o sun$->0$

For Option $2$:kwh from grid:

On Peak w$/$sun$->0$

On Peak w$/$o sun$-->1570$

On Peak w$/$sun$->0$

On Peak w$/$o sun$->8920$

For Option $2$:kwh returned from grid:

On Peak w$/$sun$->1570$

On Peak w$/$o sun$-->0$

On Peak w$/$sun$->5230$

On Peak w$/$o sun$->0$

Company management wants lo decide between the two allernatives. The planning horizon is $12$ years and annual interest is $7\%.$ Determine the PW of each alternative using present worth analysis. In calculating present worth, lef costs be posifivevalued and salvage value be negative$-$valued. Use the monthly service charge to calculate the amount paid annually.

Option $1=$$$?$

Option $2=?$

Which option should be selected:

$($Option $1$ or $2)$ Should be chosen as it has the $($Lower or greater$)$ PW of cost$.$

Pick one of which that is in the parenthesis.

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