Estimates of fuel costs for each system

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Reference no: EM131186718

A natural gas producing company is considering two engine systems for use in driving a small compressor. System A can be purchased for $120,000 and is expected to have a life of 4 years. Annual diesel fuel consumption is estimated to be 60 gallons per day of use. System B can be purchased for $150,000 and is expected to have a life of 4 years. Annual propane fuel consumption is estimated to be 40 gallons per day of use. Both engines have salvage values equal to 15% of initial cost and both will accomplish the needed requirements. Estimates of fuel costs for each system and expected days of use each year are as follows:

Assume that MARR is 8% and that all other costs besides fuel will be the same for both systems. Which system is the best economic choice?

Reference no: EM131186718

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