Two different methods of solving a production problem are under consideration. Relevant information for both methods are given in TABLE Q3. The firms MARR is 15%.

TABLE Q3

Costs	Method A	Method B
Initial Costs	52,000	80,000
Annual Operating Costs	17,000	22,000
Annual Revenue	16,000	16,000 + X
Salvage Value	15,000	20,000
Analysis Period (Year)	6	6
MARR	15%	15%

(a) What would be the required additional annual revenue for Method B such that an engineer would be indifferent to choosing one method over the other? Use PW method.

[20 marks]

(b) Plot PW versus uncertainty to show the sensitivity of PW towards the uncertainty of Annual Operating Costs relative to base case for Method A. Assume all other parameters are unchanged. Plot the curve for + 50% uncertainty.

[10 marks]