Two mutually exclusive alternatives are being considered for the environmental protection equipment at a petroleum refinery. One of these alternatives must be selected. The firms MARR is 20% per year. The estimated cash flows for each alternative are as follows:

a) Which environmental protection equipment alternative should be selected? Assume the equipment will be needed indefinitely.

b) Assume the study period is shortened to ten years and the repeatability assumption doesnt hold any more. Which alternative should be selected now?

Alternative A Alternative B Annual expenses Market value at Capital investment $20,000 5,500 1,000 $38,000 4,000 4,200 end of useful life Useful life 8 years 10 years