Many of the University of Michigans buildings can be powered by a natural gas generator in case of a main power failure. The Duderstadt Center is considering purchasing such a generator with several options available.

(a) Given the options in the table below and assuming a MARR of 10% with a 10-year life, based on the annual equivalent cost, which generator would you choose?

Option	Capital Investment	Operating Expenses (Yearly)	Salvage Value
R	$ 200,000	$ 5,000	$ 40,000
S	$ 170,000	$ 7,000	$ 25,000
T	$ 214,000	$ 4,000	$ 38,000

(b) Now, suppose that each generator has a reliability rating. For example, a rating of 0.96 means that 96 times out of 100 the generator will work correctly when main power has failed. The cost of a complete power failure (main and generator backup) is estimated at $400,000 per failure. Based on historic data, the main power fails only once year.

Option	Reliability Measure
R	0.96
S	0.95
T	0.98

Compute the expected annual costs (in case of power failure) for each generator based on its reliability measure. Based on your calculations of capital recovery, the additional expected cost in case of genera- tor failure and the yearly maintenance costs, which generator should the Duderstadt Center install?