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An oil refinery in El Paso, TX wants to purchase a new chemical reactor. The company has two types of reactors to evaluate. Reactor #1

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An oil refinery in El Paso, TX wants to purchase a new chemical reactor. The company has two types of reactors to evaluate. Reactor #1 costs $2 million to purchase; its maintenance costs would be $25,000 per year for the first 4 years and then increase $5,000 every four years starting in year 5 (that is, costs for years 5-8 would be $30,000 per year) until the end of its useful life, which is 16 years. The second option, reactor #2, has an initial cost of $1 million and annual operating costs of $120,000 for the first 6 years, and then starting at year 7 costs will be $150,000 per year indefinitely Remember: Reactor #1 is expected to last 16 years, while reactor #2 is expected to last indefinitely. Compare the alternatives at an interest rate of 12% per year. What is the difference in equivalent Annual Worth (AW) between the cost of the two reactors? (AWR1 - AWR2). Show your calculations

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