A city has two alternatives for improving its sewage system. Use a 4% cost of money, which is conservative for a municipality.
Option A: Initial cost of $12,000,000; annual operating cost of $155,000; service life of 20 years; salvage value of $2,500,000.
Option B: Initial cost of $6,000,000; annual operating cost of $250,000; service life of 10 years; salvage value of $20,000.
Which is the best alternative?