Potable water is in short supply in many countries. To address this need, two mutually exclusive water purification systems are being considered for implementation in China. Doing nothing is not an option. Assume the repeatability of cash flows for alternative 1.

System 1 System 2

Capital invest 100,000 150,000

Annual rev 50,000 65,000

Annual expenses 25,000 45,000

Market value (end) 20,000 0

life span 5yrs 10yrs

Irr 12.5% 5.6%

a. Use the PW method to determine which system should be selected when MARR=8% per year.

b. Which system should be selected when MARR=12% per year?