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this is Quastion

A company is studying two different production methods to produce its product. Both production methods have the same life and the same maintenance and repair record.

• Production Method 1: costs $120,000 and uses 20 gallons per hours of operation.
• Production Method 2: costs $175,000 and uses 18 gallons per hours of operation at the same level of production.

Both production methods have four-year lives before any major overhaul is required and the 10% of initial its cost as a salvage value. The fuel currently costs $2.40

The fuel consumption is expected to increase 1gallon/hr. every year because of degrading engine efficiency and fuel costs is expected to increase at the rate of 5% per year.

Assume 5,000 hours of operation per year and a MARR of 12%. Use the AE criterion.

1. Summarize the Net Cash Flow of Production Method 1 in table format.
2. Summarize the Net Cash Flow of Production Method 2 in table format.
3. What is
4. What is the Annual Equivalent Cost for Fuel of Production Method 1?
5. What is the Annual Equivalent Cost for Fuel of Production Method 2?
6. What is the equivalent operating cost per hour for Production Method 1?
7. What is the equivalent operating cost per hour for Production Method 2?
8. Which production methods should the company install?