Engineering Finance Homework 5 Question 1) An airline company said wll replace 39 Fokker Jets in 2015 and will evaluate two type of Aircrafts. The two options will be designed differently but will have identical capacities and will do exactly the same job. Options Aircraft A requires an investment of $32 million and has a service life of 12 years. Operating & Maintenance Costs: $1.5 million increasing by 100K each year. Salvage Value: $1.5 million at the end of its service life Aircraft B requires an investment of $35 million and has a service life of 14 years. Operating & Maintenance Costs: $1.3 million. Salvage Value: $7 million The firm expects that they will be operational for the next 16 years. Assumption 1: If they go with Aicraft A, they will spend $1.8 million to overhaul the syste and to extend its service life beyond 12 years. The expected salvage value a te end of tquired service period (16 years) will be 1 mon Assmption 2: If they go with Aircraft B, te copany will consider leasing a comparable aircraft that has an annual lease payment of 800K at the beginning of each period (with the same O&M costs as Aircraft B) for the remaining service period. The firm's MARR is known to be 10%. Using PIV analysis, which one of the options should you choose