Suppose that the government is considering constructing a power plant. It has 2 alternatives. Alternative A is a solar thermal power plant and alternative B is a fossil fuel power plant. The setup cost of alternative A is $9,500,000 with major replacement every 3 years at a cost of $500,000. The initial cost of installing alternative B is $9,000,000 with major replacement every 2 years at a cost of $480,000. Other annual operating and maintenance costs are estimated to be $450,000 for both of the alternatives. Based on a MARR of 6%, and an infinitely long planning horizon, solve the following questions

a) What is the capitalized cost of alternative A?

b) What is the capitalized cost of alternative B?

c) Which alternative should the government select?

Alternative A

Alternative B

Both Alternative

Neither Alternative