Don't copy 1. A municipality 5 years ago purchased a pump for its sewage treatment plant at $6,000. The pump had annual operating costs of $3,200 and these are expected to continue. This pump is expected to continue to operate satisfactorily for 6 additional years, at which tie it may be expected to have negligible salvage value. The municipality has an opportunity to purchase a new pump for $8,500. The new pump is estimated to have a life of 6 years, negligible salvage value at the end of its life, and an annual operating cost of $1,400. If the new pump is purchased, the old pump will be sold for $1,600. The interest rate is 12%. With no knowledge of future replacements and a 6 year study period, what option should be selected? Answer [AE(12)p= $3589 and AE(12)c = $3467]