tHANKS AGAIN

An airline is considering two types of engine systems for use in its planes. Each has the same life and the same maintenance and repair record. System A costs $120,000 and uses 37,000 gallons per 1,000 hours of operation at the average load encountered in passenger service. System B costs $250,000 and uses 26,000 gallons per 1,000 hours of operation at the same level. Both engine systems have three-year lives before any major overhaul is required. On the basis of the initial investment, the systems have 13% salvage values. If jet fuel costs $2.26 a gallon (year 1) and fuel consumption is expected to increase at the rate of 11% per year because of degrading engine efficiency, which engine system should the firm install? Assume 4,000 hours of operation per year and a MARR of 12%. Use the AE criterion. What is the equivalent operating cost per hour for each engine? Assume an end-of-year convention for the fuel cost. Click the icon to view the interest factors for discrete compounding when MARR = 12% per year. The equivalent annual costs for system A are $ (Round to the nearest dollar.) The equivalent annual costs for system B are $ (Round to the nearest dollar.) The equivalent operating cost per hour for process A is $ (Round to the nearest cent.) The equivalent operating cost per hour for process B is $ (Round to the nearest cent. ) Which engine system should be selected? Choose the correct answer below. System B O System A