Hudson Inc. needs to make a decision of whether they should purchase a new compressor for their existing air conditioning system or spend more to purchase two high efficiency heat pumps.

a) new compressor costs $20,000 and future salvage value is $2,200 at the end of 15 years. This new compressor will also save electricity cost of $6,000 annually.

b) high efficiency heat pumps costs $30,000, and future salvage value is $3,500 at the end of 15 years. The replacement will save $9,000 per year.

Assuming MARR is 12%, which option should they choose? (show steps)