Question #2 (40 Points): An engineer is trying to decide which process to use to increase the efficiency of an oil refinery. Option 1 will cost $250,000 to buy and $85,000 per year to operate. Some components will further be replaced one time per year at a cost of $5500. Option 2 will cost $300,000 to buy and $119,000 per year to operate, but will result in a sludge hauling cost to the monofill of $37,000 per year less than that of Option 1. The useful lives are 3 and 4 years for Options 1 and 2, respectively. The salvage values are calculated for each option using the following schedule: Number of years of operation 1 2 3 Salvage Value 40% of Initial cost 30% of Initial cost 20% of Initial cost 10% of Initial cost 4 Using an interest rate of 15%, determine the better alternative by: a) Using the PW Analysis with an infinite planning horizon. (16 Points) b) Using the PW Analysis with a 10-year study period. (14 Points) c) Using the AW Analysis considering the useful life of each alternative. Comment on the results. (10 Points) Question #2 (40 Points): An engineer is trying to decide which process to use to increase the efficiency of an oil refinery. Option 1 will cost $250,000 to buy and $85,000 per year to operate. Some components will further be replaced one time per year at a cost of $5500. Option 2 will cost $300,000 to buy and $119,000 per year to operate, but will result in a sludge hauling cost to the monofill of $37,000 per year less than that of Option 1. The useful lives are 3 and 4 years for Options 1 and 2, respectively. The salvage values are calculated for each option using the following schedule: Number of years of operation 1 2 3 Salvage Value 40% of Initial cost 30% of Initial cost 20% of Initial cost 10% of Initial cost 4 Using an interest rate of 15%, determine the better alternative by: a) Using the PW Analysis with an infinite planning horizon. (16 Points) b) Using the PW Analysis with a 10-year study period. (14 Points) c) Using the AW Analysis considering the useful life of each alternative. Comment on the results. (10 Points)