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Your brother asks you to compare two options for air compressors for his mechanic shop. Option A costs $50,000 and runs on diesel fuel. Yearly
Your brother asks you to compare two options for air compressors for his mechanic shop. Option A costs $50,000 and runs on diesel fuel. Yearly maintenance costs are $500 and the machine has a useful life of 10 years. Option B costs $60,000 and runs on electricity. Maintenance costs for machine B are $250 yearly and the machine has a salvage value at the end of its 10-year useful life of $2000. Fuel prices are expected to increase by 2.5% each year over the last year, while electricity prices are estimated to increase by a standard $100 each year. The price of diesel fuel today is $1/gallon and Machine A is predicted to use an average of 650 gallons per year, while electricity costs to run Machine B in the first year are estimated to be $750. Use present worth analysis, a 10-year planning horizon, and i = 5%
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