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 $100,000 and uses 38,000 gallons per 1,000 hours of operation at the average load encountered in passenger service.

System B costs $250,000 and uses 27,000 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 15% salvage values. If jet fuel costs $2.11 a gallon (year 1) and fuel consumption is expected to increase at the rate of 9% per year because of degrading engine efficiency, which engine system should the firm install? Assume 3,000 hours of operation per year and a MARR of 14%. 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.